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2019 (10) TMI 830 - ITAT MUMBAIIncome accrued in India - Reimbursement of expenses incurred by the Appellant on behalf of HSBC Electronic Data Processing India Private Limited (HDP) as taxable in the hands of the Appellant - HELD THAT:- HSCI had paid a referral fee to assessee for introducing ABB to HSCI. Briefly, ABB Switzerland wanted to increase its equity stake in ABB Ltd. India through a voluntary offer and hence needed the services of a merchant banker in India. As per Section 9 of the Act, income earned by a non-resident is taxable in India if, inter-alia, the non-resident has a business connection in India and the income arises through or from the business connection; or it is in the nature of royalty or ‘Fees for Technical Services’. Factually speaking, in relation to earning of the said referral fees, the assessee did not carry any activity in India. Referral fees has been received by the assessee on account of the referral made by assessee for the potential rendering of services by HSCI to the prospective client so referred. In the activity carried out by assessee (for which it has earned referral fee from HSCI), there is no element of managerial, technical or consultancy function discharged by assessee. In fact, the services are nothing but commercial services. Accordingly, the referral fees received from HSCI cannot be construed as ‘Fees for Technical Services’ under Explanation 2 to Section 9(1)(vii) of the Act and, therefore, not subject to tax under Section 9(1)(vii) of the Act. Since neither Section 9(1)(i) or Sections 9(1)(vi) and 9(1)(vii) of the Act bring this income within the scope of the taxing provisions, the referral fees received by the assessee from HSCI cannot be deemed to accrue or arise in India under Section 9 of the Act. Hence, such income is not taxable within the provisions of the DTAA in light of the interpretation given as per Memorandum of Understanding concerning ‘Fees for Technical Services’ in Article 12 of India-USA DTAA. In view of the above discussion, we direct the Assessing Officer to delete the said addition sustained by the CIT(A), and assessee succeeds on this Ground of appeal. Protection fee received from HSBC Asset Management India Pvt Ltd (AMIN) as ‘Fees for Technical Services’ - HELD THAT:- We find that services provided by the assessee do not make available any technical knowledge, experience, skill know-how or processes to AMIN within the meaning of Article 13 of the DTAA. Accordingly, the same would not qualify as ‘Fees for Technical Services’ under Article 13 of the DTAA. Further, given that the services have been provided by the assessee in connection with the business carried on by the assessee in UK, the same are to be treated in the nature of business profits. In this regard, Article 7 of the DTAA provides that business profits earned by an enterprise of UK are taxable in India, only if such enterprise has a PE in India as defined in Article 5 of the DTAA. In the present case, since the assessee does not have a PE in lndia, the protection fee received by the assessee from AMIN is not taxable in India as per the provisions of Article 7 of the DTAA. Hence, we direct the Assessing Officer to delete the said addition - Decided in favour of assessee.
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