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2023 (9) TMI 478 - ITAT DELHI
Income taxable in India - screening and investigation services provided by the assessee to its customers in India - Royalty or Fees for Technical Services (“FTS”) - whether such income chargeable to tax in India under the provisions of Article 13 of the India-UK DTAA? - HELD THAT:- It is an undisputed fact that the assessee is a tax resident of UK and does not have a PE in India and hence it has opted to be governed by the provisions of the India-UK DTAA being more beneficial to the assessee.
As gone through the relevant extracts of the said agreement and are convinced with the contention of the Ld. AR that the assessee’s role is restricted to verification of the information concerning various candidates proposed to be hired by its clients (viz. educational qualifications, past employment details etc.) and providing the clients the relevant facts captured by the assessee during the course of validation.
It is also evident that the assessee physically verifies the information/data in relation for screening services. The reports generated thereof are delivered to the clients in physical mode and/or through online access. The assessee does not provide any advice/analysis/recommendation on hiring of the employees by its client and does not assume any responsibility with regard to hiring decisions taken by its clients on the basis the assessee’s report. The information collected by the assessee is not protected by any copyright but its circulation is regulated under the UK and other local laws.
Considering the nature of the business of the assessee, it has to comply with the local laws wherein a duty is cast upon the assessee to ensure the confidentiality of reports which contains details of the applicants.
Further the assessee does not provide access to any database to its clients but only access to reports requisition by the client in electronic form. Provision of online access of the report to its client is limited to providing access to the specific report providing relevant facts for the concerned candidates captured during the course of validation. Nothing has been brought on record by the Revenue to refute the aforesaid claim of the assessee. Thus online access to background screening results cannot be construed as providing access to database maintained by the assessee.
The screening report which is issued does not involve any transfer of commercial experience to the client or getting the right to use the experience. There is also no transfer of any skill or knowledge of assessee to the customers in the issuance of screening reports, as the client is only given access to findings of the assessee in the form of a report which contains factual information but nowhere the assessee imparts its experience, skill of carrying out background screening services to its client. It is thus clear that there is no imparting of information concerning industrial, commercial or scientific experience by assessee when it issues the reports to its clients.
Characterisation of impugned receipts as FTS, in our view, the services rendered by the assessee do not involve any technical skill/knowledge or consultancy or make available any technical knowledge, experience, skill, know-how or processes to the clients. Assessee's role is restricted to the verification of information provided by various candidates proposed to be hired by its clients. It involves seeking information from various sources that is accessible on specific requests and no advice/guidance on the credentials of the candidate is provided by the Assessee to its client.
The role of the assessee is limited to validation of data provided by the candidate and provide relevant facts captured during the course of validation. The clients make an independent decision to hire the candidate. Hence, in our view the services should not be considered as FTS under Article 13(4) of the India-UK DTAA. Accordingly, ground No. 1 to 2.3 are decided in favour of the assessee.