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2024 (4) TMI 86 - ITAT DELHITaxability in India of receipts of foreign AEs - Master Service Agreement relied upon - case set up by the appellants is that they and HCLT are part of the HCL group with the assessee being subsidiaries and associated enterprises of HCLT and HCL America (HCLA) provides service to clients of HCLT outside India as per agreement entered into with the HCLT. The assessee companies provide marketing and sales support as well as on site services - HELD THAT:- Considering primarily a Master Service Agreement which is relied by the assessee and the coordinate Bench in ITA No.537/Del/2021 [2024 (1) TMI 309 - ITAT DELHI] says that Master Service Agreement entered into between HCLT and the foreign AEs is in the nature of a business arrangement, by which the dominant intention of the parties to come together and serve the overseas customers is fulfilled, HCLT was merely distributing the receipt of payment from the overseas customer to the group entities for their share of the work and the payment received by the foreign AEs from HCLT was only in the nature of revenue sharing and cannot be construed to mean that services were provided by the foreign AEs to HCLT. Co-ordinate Bench further held that both HCLT and the foreign AEs are jointly rendering services to the customers located outside India; billing is done on a consolidated basis on the customer by HCLT (including the services rendered by the foreign AEs to the customer located outside India); payments are received by HCLT from the customer located outside India and thereafter, revenue is shared by HCLT with the foreign AEs for the proportionate volume of services rendered by the foreign AEs to the customer. Also held that AO erred in holding that the services were rendered by foreign AEs to HCLT and the said findings of the AO are contrary to the binding directions of the DRP of the order wherein DRP held that major part of module development and writing of codes on software application is carried out by HCLT and only some of it is being done by foreign AEs; that both HCLT and foreign AEs are working together on the server of the client to develop the final product. Coordinate Bench after analyzing the statements of employees recorded in survey proceedings held that the same actually support the contentions of the foreign AEs. The Bench held that on analysis of the statements in a holistic manner, it was clear that that both onsite and offsite personnel of the foreign AEs and HCLT respectively were responsible for writing the code; that the respective teams of the foreign AEs and HCLT work directly with the foreign customer's managers; that in majority of the projects, the entire development environment is owned by foreign customer; that the code and test scripts are worked on from foreign customers' servers and provided directly on the said servers; that the integration is normally done through customer build machines that integrate the various units of code into a solution. It was, accordingly, held that payments made by HCLT to the foreign AEs could not be construed as FTS. Decided in favour of assessee. Amount received by the Appellant for rendering BPO services included in assessed income - As submitted that in all other cases, the assessing officer has not assessed to tax the receipts of the foreign AEs in respect of BPO services. Only in the impugned orders passed in the aforesaid 3 cases, payments towards BPO services have also been brought to tax. It is submitted that addition in respect of the same deserves to be deleted on the same reasons as the ones recorded by the Hon’ble Tribunal in order dated 20.12.2023 passed in the case of foreign AEs. We concur to the same.
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