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TMI Blog2025 (1) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... fect on the disputed issues arising in Revenue's appeal for A.Ys. 2019-20 and 2020- 21 is below the threshold limit of Rs. 60 lacs, thus, he submitted, the appeals of the Revenue are not maintainable. 4. In response to query raised by the Bench, in the context of the aforesaid submission of learned counsel for the assessee, the learned Departmental Representative ('ld. DR' for short) fairly agreed that the tax effect in both the appeals is below the threshold limit of Rs. 60 lacs. 5. In view of the aforesaid submissions of the parties, we dismiss the appeals of the Revenue, being ITA Nos. 1775/Mum/2024 and 2342/Mum/2024 as well as the corresponding cross objections, being CO Nos. 101/Mum/2024 and 102/Mum/2024. 6. As regards the rest of the appeals of the Revenue, being ITA Nos. 1774/Mum/2024 and 2341/Mum/2024, the first common issue is with regard to taxability of administrative support service charges as fees for technical services (FTS) in terms of Article 13 of Double Taxation Avoidance Agreement (DTAA) between India - United Kingdom (UK). 7. Briefly stated, facts relating to these issues are, the assessee is a non-resident corporate entity, incorporated in United Ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances, the administrative support services fee cannot be made taxable as FTS under the treaty provisions. The A.O., however, did not agree with the contentions of the assessee and proceeded to complete the assessment treating the administrative support services fee as FTS under the treaty provision and brought it to tax. 9. The assessee contested the afore-said addition before learned first appellate authority. 10. After considering the submissions of the assessee, in the context of the facts and materials on record, learned first appellate authority noticed that while deciding identical issue in assessee's own case for A.Y. 2012-13 the Tribunal had held that the fee received towards administrative support services cannot be regarded as FTS under Article 13 of the Treaty. Thus, following the said decision, the learned first appellate authority decided the issue in favour of the assessee. 11. Before us, it is a common point between the parties that the issue is squarely covered by the decision of the co-ordinate bench in assessee's own case in A.Y. 2012- 13. While going through the afore-said decision in ITA Nos. 5674 and 5675/Mum/2017, vide order dated 28.03.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to JIPL as set out in schedule A to this agreement. The JIPL is willing to identify potential clients for each of JIL, Jefro and JHKL for such corporate finance services as each of those intragroup companies mentioned above (in technical terms, provide marketing services to its group concerns) and in turn the group companies (JLLC, Jefco and JHKL) may engage in and to provide various administrative, day to day management and similar consulting functions in relation thereto. The fact that even the assessing officer has confirmed that the assessee has provided the administrative services to the JIPL and he is of the opinion that the services are received by the Indian entity in the course of their normal business activities and it has benefitted by employing best talent in the business to improve their business and their project. Therefore, it is continuous in nature, hence it amounts to make available. It is fact on record that the assessing officer is not disputing the fact that the assessee has provided the administrative and day to day management services to the JIPL. 8. We observe, as per clause 4 of the agreement, for each of JIPL client engagement, each of JIL, JEFCO and JH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out by the intra group companies through the intermediary company i.e., JIPL as per the requirements of customers/clients in India. 11. From the above, we observe that the assessee provides the administrative and day to day management services to the JIPL, this fact is confirmed by the observation and relevant material placed before us that the Indian entity JIPL does not have any support team and administrative set up to carry out the business independently. All the support services are provided by the intra-group entities and particularly, the administrative and day to day management services are provided by the assessee. The Ld.CIT(A) has confused with the two schedules viz., Schedule A and Schedule B and came to wrong conclusion by observing the bill copies submitted before him for reimbursement of certain charges for which the assessee has outsourced certain services for the whole group and whatever the services are utilized by the assessee are alone charged to the JIPL. Therefore, in our considered view, the services provided by the assessee in order to support and provide the administrative and day to day management services to the JIPL are in the nature of group suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Licenses and compliance m Computer and phone networks 6. Training a Global training conferences b Monthly training sessions c Ad hoc training as required 7. Legal a Contract review b Litigation management c Other legal services as required 9.5 We agree with the contention of the assessee that managerial services are outside the scope of the meaning of FIS under Article 12(4) of the India USA DTAA. Wherever the intention of the legislature is to include managerial services within the scope of FTS/ FIS, the same has been expressly mentioned therein. This contention of the assessee finds support by the jurisdictional Delhi Court judgment in the case of Steria (supra). The relevant para of the judgment is reproduced below. 19. The next question that arises is concerning to extent to which the benefit under the India-UK DTAA can be made available to the Petitioner. As already noticed, the definition of "fee for technical services" occurring in Article 13(4) of the Indo- UK DTAA clearly excludes managerial services. What is being provided by Steria France to the Petitioner in terms of the Management Services Agreement is managerial services. It is plain that once t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. {emphasis supplied} Typical categories of services that generally involve either the development and transfer of technical plans or technical designs, or making technology available as described in paragraph 4(b ), include : 1. Engineering services (including the sub-categories of bioengineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by virtue of section 90(2) of the Act, is eligible to rely on the provisions of the India Singapore DTAA, should the same be more beneficial than the provisions of the Act. In this regard, we fruitfully rely on the judgment of the Hon'ble Delhi High Court in the case of New Skies Satellite BV & Ors (ITA No. 473/2012) wherein it is held that provisions of DTAA shall prevail over the provisions of the Act, if they more beneficial. At this moment, we refer to Article 12(4) of the India-Singapore DTAA which explains the expression 'make available' as under: "Article 12(4): The term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through 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, which enables the person acquiring the services to apply the technology contained therein; o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider." In the case of M/s Bharati Axa General Insurance Co. Ltd., the AAR has ruled as under : "9. The definition of FTS as contained in clause (b) of Article 12.4 is explicitly designed to restrict the scope and ambit of the technical and consultancy services. Even if we proceed on the basis that some of the services have the flavour of imparting technical knowledge and experience to the recipient of service, the further question is whether such provision of services enables the person acquiring the services to apply the technology contained therein. This test specifically laid down in clause (b), in our view, is not satisfied and the legal position clarified by this Authority while interpreting more or less similar Treaty provisions applies with greater force to the present case in view of the narrow language employed in the India-Singapore DTAA. Providing comments and suggestions after reviewing the strategies and plans developed by the Applicant, giving suggestions to the Applicant to improve the product developed by it so as to bring it in line with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, we find that subsequently, after considering the decision in the case of Shell India (supra), the Mumbai ITAT in the case of Linklaters LLP (ITA No. 1690/Mum/2015) dated 31.01.2017 held that from none of legal advisory services it can be said that technical knowledge, skill, experience, knowhow or process remained with the clients to whom services were rendered by the assessee, even after the rendition of services was completed and agreement came to an end. These services were of purely legal advisory nature; it cannot be said that recipient of the services was in a position to duplicate similar skill or technology or techniques in future without the aid or assistance of the assessee for carrying out similar assignments. In the case of Perfetti Van Melle Holdings BV (supra), the applicant is a company based in Netherlands and it is in the business of manufacture and sale of sugar confectionary and gun. It also provides operational and other support services for the benefit of companies of Perfetti group situated in various countries. It has entered into a service agreement with the group company (Perfetti India). The AAR held that when the expertise in running the industry ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of the assessment proceeding, the A.O., while perusing the notes to the computation of income, noticed that the assessee had incurred certain expenses on behalf of its Indian subsidiary, JIPL, which were reimbursed by the subsidiary to the assessee. Noticing this fact, the A.O. called upon the assessee to explain why such reimbursement of expenses should not be treated as FTS. Objecting to the proposed action of the A.O., the assessee submitted that the reimbursement of expenses being purely on cost-to-cost basis, without any mark-up/profit element, it cannot be made taxable as FTS. However, rejecting the contention of the assessee, the A.O. proceeded to treat the reimbursement of expenses as FTS and brought it to tax while framing the assessment. 15. Before us, the parties have agreed that the issue is squarely covered by the decision of the co-ordinate bench in assessee's own case for A.Y. 2012-13 (supra). 16. Having taken note of the relevant facts and perused the decision of the co-ordinate bench in assessee's own case in A.Y. 2012-13, we find, while considering identical issue, the co-ordinate bench has held as under: "14. Coming to the next issue of reimbursement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of reimbursement of the expenses, it cannot be income chargeable to tax." 15. Further the services provided by the third party through the holding company do not allow the make available any technical knowledge, skill, know how or processes to the JIPL or to the assessee within the meaning of Article 12 of Treaty between India - US. Therefore, even in this count, the reimbursement of expenses outside the tax net in the source country. Accordingly, the grounds raised by the assessee are allowed." 17. There being no material difference in factual position in the impugned assessment years, respectfully following the decision of the co-ordinate bench in assessee's own case, we hold that reimbursement of expenses cannot be treated as FTS. Accordingly, we uphold the decision of learned first appellate authority by dismissing the grounds raised. 18. Ground nos. (vi) being general in nature, does not require adjudication. 19. In view of our decision in Revenue's appeals, the corresponding cross objections filed by the assessee, have become infructuous, hence, dismissed. 20. To sum up, all the appeals and cross objections are dismissed. Order pronounced in the open court on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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