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2023 (10) TMI 1181 - AT - Income TaxIncome taxable in India - Taxability of Management Service Fees (MSF) - services provided by the assessee in terms of service agreement - Royalty - whether any imparting of any kind of knowledge, skill or experience? - HELD THAT:- With regard to various streams of services like providing of information technology, operational support marketing, quality, health, safety and environment, estimating and engineering and personal and organization, administration and legal services, it has been held that there is no imparting of any kind of knowledge, skill or experience by way of information concerning industrial, commercial or scientific which is made available to VOIPL. For instance, assessee has stated that, information technology services are provided for use of group companies computer system where IT teams provide manual general information without providing any information or method to design or create a computer system. IT is mainly kind of help desk and trouble- shooting services which are required on a regular basis. For operational support system also, it mainly provides for check- list for project plans, safety work and inspection plans etc. Similarly, for marketing, the assessee provides for e- marketing through its website and maintaining it, printing and publishing brochures which can be distributed to its potential clients. It also helps VOIPL to obtain certificate of approval from concerned organizations and obtained the contracts on the regular basis. Regarding quality health and safety environment services, the assessee merely conducts internal audits at regular intervals so that proper adherence to such quality standards and procedures are valid/ should remain valid. Similarly, in the estimating and engineering services and other services also, the assessee is mainly providing tender process, helping and preparing (estimates) and bids and plan consisting in local performance and other guarantees to the client of VOIPL etc. For rendering of these services, there is no element of imparting any "know how or there is transfer of any knowledge, skill or experience. Thus, we hold that none of the services provided by the assessee in the term of "service agreement" falls within the scope and ambit of "royalty" as defined in Article 12(4) of the DTAA. Here again, Management services fees charged is an allocation of cost which is without markup, hence it has been stated that the same being in nature of reimbursements do not constitute Royalty as per India-Netherlands Double taxation avoidance agreement (DTAA'). We find that the aforementioned decision of the ITAT in assessee’s own case for AY 2009-10 [2016 (11) TMI 1249 - ITAT MUMBAI] has also held that the payments received by the assessee are in nature of reimbursement without any markup and thereby, such reimbursements cannot be held to be royalty. None of the services provided by the assessee in terms of service agreement falls within the scope of Royalty as defined in Article 12(4) of the India Netherlands DTAA and also that the payments received by the assessee are in the nature of reimbursement without any mark-up and therefore, the same cannot be held to be ‘Royalty’ and not taxable in India. Further, Management Services if represents the allocation of the actual cost incurred which has been certified by the auditors and the Tribunal has held that Management Services Fee are not taxed in India. Accordingly, this issue is decided in favour of the assessee.
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