Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (1) TMI 1207 - AT - Income TaxIncome deemed to accrue or arise in India - TSIS Service Fee received by the assessee is taxable as royalty- India France DTAA - HELD THAT:- We find that the taxability of income arising from similar services rendered by the assessee’s group concern, namely, Edenred PTE Ltd came up for consideration before the coordinate bench of the Tribunal in Edenred PTE Ltd [2021 (1) TMI 76 - ITAT MUMBAI] for the assessment year 2013-14. The coordinate bench of the Tribunal after considering the facts of the case decided the similar issue in favour of the assessee’s group concern and held that income arising from the provision of services by the assessee cannot be treated as royalty either under the provisions of the Act or under the India Singapore DTAA. An the present case, from the nature of services provided by the assessee, it is evident that the services are performed by the assessee’s own personnel in France and the payment on account of search services was directly remitted by the Indian group companies to the assessee. As part of the TSIS Service Agreement, the Indian group companies only receive standard services and no licences in any software/right to use any software etc. is provided - there is no sharing of any confidential information by the assessee with the Indian group companies. The term ‘Royalty’ is not as widely defined in India France DTAA as in the India Singapore DTAA, which was taken into consideration by the coordinate bench of the Tribunal in the case of sister concern. Since it has not been disputed that the facts of the present case are similar to the case of the assessee’s group concern, wherein income arising from services of similar nature are held to be not taxable as royalty, therefore, we find merit in the plea of the assessee. Accordingly, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we direct the AO to delete the addition in respect of TSIS Service Fees received by the assessee. As a result, ground No. 2 raised in assessee’s appeal is allowed. Management Service Fee received by the assessee in the nature of royalty - As per the assessee, the services are provided only to support the Indian group companies in carrying on business efficiently and running the business in line with the business model, policies, and best practices followed by the Edenred group. From the perusal of documents available on record, it is evident that the services are general management services rendered by the assessee to its Indian group companies on a recurring basis and there is no use or right to use any copyright, patent, trademark, design, etc. Further, there is no sharing of any confidential information by the assessee with the Indian group companies. Though the assessee is a resident of France and therefore, is entitled to provisions of the India France DTAA, however, even under the provisions of the Act the fees received by the assessee for rendering the aforesaid services do not constitute royalty. As the impugned management services rendered by the assessee are to be examined only on the touchstone of royalty in the present appeal, therefore, we are of the considered view that Management Service Fee received by the assessee is not in the nature of royalty and thus, the AO is directed to delete the addition on this account. As a result, ground No. 3 raised in assessee’s appeal is allowed. Taxability of management service fees received by the assessee as fees for technical services - India France DTAA - HELD THAT:- As during the year under consideration, the assessee rendered the services to its Indian group companies under Management Services Agreement which was executed in the preceding assessment year. Under the agreement, the services provided by the assessee broadly include management services in the nature of public relations services, corporate social responsibility, partnership opportunities, networking coordination, financial services, legal services / advices, human resources. The assessee, inter-alia, claimed benefit under para 7 of the Protocol to the India France DTAA and submitted under the restrictive definition of ‘fees are included services‘ as provided in Article 12(4) of the India USA DTAA, the services provided by the assessee are not taxable. In order to decide the claim of the assessee, it is relevant to note the provisions of the Protocol to the India France DTAA. In the present case, the assessee is a resident of France and thus in view of para-7 of the Protocol to the India France DTAA has sought the benefit of the restricted scope of the definition of ‘fees for included services’ as provided under the India USA DTAA. We are of the considered view that CBDT Circular No. 3/2022 dated 03/02/2022 is not applicable to the present appeal. Therefore, in view of the aforesaid findings, we are of the considered opinion that the assessee is entitled to claim the benefit of the restricted definition under India USA DTAA in view of the Protocol to the India France DTAA. Since the assessee has been found not to have ‘made available’ any technical knowledge, experience, skill, or know-how, therefore, Management Service Fees received by the assessee cannot be taxed under the provisions of Article 13 of the India France DTAA read with para 7 of the Protocol to the India France DTAA and Article 12(4) of India USA DTAA. In view of the above, the alternative claim of the assessee under India Finland DTAA becomes academic. Further, once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Act, as in terms of section 90(2). The taxability of impugned receipts, u/s 9(1)(vii) of the Act, is thus wholly academic. Hence, the AO is directed to delete the addition on this account. Accordingly, ground No. 2 raised in assessee’s appeal is allowed.
|