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TMI Blog2025 (3) TMI 706X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/2023- 24/1057558466(1) 2. Since the issue in all these appeals is common, for the sake of convenience, we are deciding these appeals by way of this consolidated order. ITA No.1136/Bang/2023 (AY 2012-13) ( lead matter): 3. We take the appeal in ITA No.1136/Bang/2023 for the AY 2012-13 as base appeal for adjudicating the common issue emerging in all these appeals and hence, reproduce the grounds raised by the assessee in this appeal as follows: 1. The Order dated 31 October 2023 passed under section 250 by the Learned Commissioner of Income tax (Appeals) ('CIT(A)') for the subject AY is bad in law and on facts. 2. The Learned CIT(A) erred in upholding the view of Assistant of Income-tax, International taxation Circle - 2(2), Bengaluru ('Learned AO') that the payments towards testing charges and management fees, to the non-resident group entities ('Payees') fall under the ambit of Fees for Technical Services/Fees for Included Services ('FTS/FIS') as per the Double Tax Avoidance Agreement of India with the respective tax jurisdictions of the Payees ('Tax treaties'). 3. The Learned AO & CIT(A) has erred in treating the Appellant as ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in their respective return of income and have paid taxes due on such income declared in the return of income, and accordingly the demand under section 201(1) of the Act results in double taxation and thus ought to be reduced. Non-deduction of withholding taxes on payment 13. The Learned AO & CIT(A) have erred in contending that the payment made towards management fees is in the nature of FTS as per the India-USA tax treaty. 14. The Learned AO & CIT(A) have erred in not appreciating the fact that the services provided by Underwriters Laboratories Inc. is in the nature of administrative services provided to the Appellant and that such services do not make available any technical knowledge, experience, skills or know how as required by the India-USA tax treaty for the payment to qualify as FIS. 15. The Learned CIT(A) has erred in facts and law that as the Appellant was carrying out testing and certification services, the management services rendered by Underwriters Laboratories Inc. enabled the Appellant in performing its functions and hence such payment is taxable. 16. The Learned AO & CIT(A) have erred in appreciating the fact that even though the Appellant has benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on this issue. Without taking recourse to the any of the above provisions, UL India had paid the testing charges to its vendors without deduction of tax at source. 4.1 Before the AO, it was claimed by the assessee that no tax had been deducted at source u/s 195, since the impugned payment to the vendors was in the nature of fees for included services but technical knowledge, skill, etc. was not made available to the assessee in terms of the treaty provisions with USA. A notice u/s 201(1)/201(1A) of the IT Act was issued to the assessee company on 01.02.2019, initiating proceedings to treat the assessee company as an assessee in default, for the failure to deduct taxes u/s 195 of the IT Act on the testing charges and management fees paid. After examining the agreement between the assessee and UL USA, the AO noted that the agreement and also the procedure involved in testing of samples by UL USA clearly indicated that the foreign entity was delivering services to the-assessee by providing it with the test results which was further passed on to the customers of the Indian company. In short, the technical services rendered by UL USA are utilized by the assessee company in its busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compatibility. g. Assess the results of commercial inspection and testing services. h. Assess inspections of customer manufacturing facilities and or products to determine whether relevant UL or other requirements are met or continue to be met. i. Assess management systems to relevant standards. j. Supervise work conducted by entities with which a party has contracted including review of test results submitted to a party by entities with whom it has executed memoranda of understanding. k. Conduct advertising, marketing and promotional activity on behalf of the other party and l. Provide administrative services associated with above listed items including but not limited to technology support, legal services, human resources and financial administration e services. 8.4 As per the terms of the agreement various support services have been rendered by the US entity to the assessee company, which are utilized by the assessee company in its business activity of testing of products. The administrative services, legal services and technical support services rendered enabled the assessee company to take quick and correct decision making and successful completion of testing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the issues against the assessee on the ground that the agreement between assessee and the parent companies proves beyond doubt that there was exchange of technical knowhow between the assessee and the parent companies and therefore, the AO has rightly held that the assessee has committed default by not deducting TDS of the payments made. The ld. CIT(A) has also relied upon certain judgements for supporting his view regarding the taxability of management fees in India and decided both the issues against the assessee. Now the assessee has come up in appeal before us. 5. The main plank of the argument of the ld. Counsel for the assessee is that there was no exchange of any technical knowledge knowhow process between the assessee and the service provider and hence as per the provisions of Article 12(4) of DTA between India and USA, the payments made by the assessee were not attracting any TDS liability. Ld. Counsel also drawn the attention of the bench towards the fact that in subsequent years, the department has accepted the payments made for testing charges under the name and style of sub-contracting fees has ben accepted by the revenue. 6. Ld. D.R. appearing on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges to UL Switzerland after deducting the TDS. However, the assessee failed to elaborate as to why the testing is done by UL USA and trademark uses charges are paid to Switzerland. We observe that the customers are entitled for using the trademark charges only after the process of testing from UL USA. All these facts require fresh consideration at the end of AO. Before parting we clarify that the AO will examine the facts of the present case in the light of the judgments cited by the assessee. The assessee has also filed some sample of the quotations, order acknowledgment copies etc., for proving the nature of transactions. The AO will examine the claim of the assessee in the light of these evidences. 9. The next issue in ground number 13 to 17 is the taxability of management fee. The shorts facts are already discussed elsewhere in this order. The main contention of the assessee is that the payments made are not in the nature of FTS as the service providers has not imparted the knowledge, skill know how to the assessee and the payments is mere reimbursement of the global costs which the assessee has to necessarily incurred for maintaining global standard. 10. Ld DR relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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