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TMI Blog2025 (3) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... nd supported in coordination of marketing exercise and Supported RCIPL in advising on potential transaction options and evaluation of pros and cons of such options.
On a reading of the assessment order and the DRP directions, we found that none of the authorities have given any reasoning as to how the advisory services rendered by the assessee to RCIPL during the year under consideration satisfies make available clause and is taxable as FTS under Article 13 of the India UK DTAA.
In our considered view none of the above services rendered by the assessee to RCIPL suggest that such services provided by the assessee resulted in transfer of technical knowledge, knowhow, skill etc. and fulfills the make available clause under Article 13(4)(c) of India UK DTAA.
Therefore, the reasoning and the findings given by the Tribunal for the assessment years 2018-19 and 2019-20 applies even for the fees for advisory services and, therefore, we hold that such receipts also would not fall within the definition of FTS as provided under Article 13(4) of India UK DTAA. Ground nos. 2 & 3 are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fact that the services rendered by the Appellant do not make available technical knowledge to the recipient of the services and hence not taxable in India under Article 13 of the DTAA. 2.1 Without prejudice to the Appellant's contention that none of the services rendered under the group services agreement are taxable in India under the Article 13 of the India-UK DTAA, the learned AO has erred in not restricting the addition to only a sum of INR 77,96,582/- out of INR 2,47,83,056 /- earned for services rendered under group services agreement as attributable to the specific services identified by the Ld. AO as FTS in the final assessment order dated 20 January 2023. 3. On the facts and in the circumstances of the case and in law, the Ld. AO erred in making the addition of amount of INR 4,34,67,740/- earned for fees for advisory services by treating it as FTS under Article 13 of the India- UK DTAA without appreciating the fact that the services rendered by the Appellant do not make available technical knowledge to the recipient of the services and hence not taxable in India under Article 13 of the DTAA. 4. On the facts and in the circumstances of the case and in law, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, all of which was based on the inputs received from the client and supported in coordination of marketing exercise and supported RCIPL in advising on potential transaction options and evaluation of pros and cons of such options. The Ld. Counsel for the assessee submits that rendering of any of these advisory services do not result in transfer of technical knowledge, knowhow, skill, etc. and, therefore, make available condition provide under Article 13(4)(c) is not complied. In such a situation, the fee received for advisory services would not fall within the definition of FTS as provided under Article 13(4) of India UK DTAA. The Ld. Counsel submits that the findings given by the Tribunal in respect of Intra Group Services will also apply to the fee received towards advisory services. The Ld. Counsel for the assessee further submits that neither the AO not the DRP has provided any reasoning as to how the advisory services rendered by the assessee to RCIPL during the year specifies make available clause and is taxable as FTS under Article 13 of India UK DTAA. 5. On the other hand, the Ld. DR supported the orders of the AO as well as the DRP. 6. Heard rival submissions, perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 the rendering of any (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received ; or (b) are ancillary and subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvisory 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 entities in making correct decision on the aspects specifically referred to in the agreement. Thus, the nature of services provided to the Indian AE does not seem to be falling in the category of either technical or consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assisting the Indian AE in making the correct decisions on certain aspects as specifically provided under the group service agreement. Such rendition of services do not result in transfer of techni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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