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DCIT (IT) 2 (1) (1) , Mumbai Versus M/s. Credit Suisse AG

2018 (2) TMI 969 - ITAT MUMBAI

Income accrued in India - Referral fees received by the assessee from Credit Suisse Securities (India) Pvt. Limited - constitute “Fees for Technical services” - Held that:- Merely because the fee was payable by the Indian Company to CSDB after execution of the work of the referred client is no ground to determine the nature of the payment. In this context, the Authority for Advance Rulings in the case of Cushman & Wakefield(S) Pte. Ltd., (2008 (7) TMI 8 - AUTHORITY FOR ADVANCE RULINGS) has dealt .....

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aid decisions have also been referred and relied upon by the DRP in concluding that the ‘referral fee’ is in the nature of ‘commission’ to be taxed as ‘business income’ and not as ‘fees for technical services’. In the course of hearing before us, no decision to the contrary has been brought out by the Revenue. For all the said reasons, we are unable to uphold the stand of the Assessing Officer that the impugned ‘referral fee’ was a consideration in the nature of ‘fees for technical services’. .....

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branch (PE) had no role to play in the performance of the referral activity, the referral fee of ₹ 18,27,90,578/- earned by CSDB could not be construed to be attributable to assessee’s PE in India and thus, the DRP rightly applied Article 7 of Indo- Swiss Double Taxation Avoidance Agreement (DTAA) and held the same to be non-taxable in India.- Decided in favour of assessee. - ITA No.1247/Mum/2016, ITA No.7357/Mum/2017, Cross Objection No.278/Mum/2017 And ITA No.1247/Mum/2016) - Dated:- 9-2 .....

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assessment year 2011-12 with regard to the nature and treatment of fee of ₹ 18,27,90,578/- earned by the assessee from Credit Securities (India) Private Limited (hereinafter referred to as Indian Company). 2. First we shall take up the appeal of the Revenue in ITA No.1247/Mum/2016. The Grounds of appeal raised by the Revenue read as under:- 1. Whether On the facts and under the circumstances of the case and in law, the Ld. DRP is right in holding that the referral fees received by the asse .....

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and Treaty, as it is not attributable to a PE in India. 3. The Appellant prays that the order of the Id. DRP on the above grounds be set aside and that of the Assessing Officer be restored. 4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. Briefly put, the relevant facts are that the assessee before us is an entity incorporated in Switzerland and is a tax-resident of Switzerland. The assessee is a part of the Credit Suisse group, a global b .....

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e enterprise. Before the Assessing Officer, assessee canvassed that the said sum was received by CSDB for referring an Indian resident client to the Indian Company for bringing out issue of convertible bonds. The assessee contended that such referral fee received by CSDB was a business income not liable to tax in India because CSDB did not have a permanent establishment in India as recognised in Article 5 of the Indo-Swiss Double Taxation Avoidance Agreement (DTAA). The Assessing Officer however .....

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ee being located in India, the same was taxable in India. In coming to such conclusion, the Assessing Officer differed with the assessee on the nature of the impugned fee, which according to him was in the nature of fee for technical services and not business income as contended by the assessee. For the said reasons, the Assessing Officer brought to tax a sum of ₹ 18,27,90,578/- to tax in hand of the assessee as fee for technical services earned by CSDB in the draft assessment order passed .....

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he DRP has ultimately upheld the plea of the assessee of nontaxability of the said receipts in India on a short point, which is to the effect (i) that the referral fee income in question is not in the nature of fee for technical services ; and (ii) that, the referral fee was not attributable to assessee s Permanent Establishment (PE) in India, and thus such referral fee was not liable to be taxed in India as per Article 7 of the Indo-Swiss Double Taxation Avoidance Agreement (DTAA). In sum and s .....

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tated Grounds of the appeal whereby, firstly, it is canvassed that the DRP was wrong in holding that the referral fee received from Indian Company did not constitute fee for technical services . Secondly, the Revenue has also canvassed error on the part of the DRP in holding that the referral fee could not be considered to be attributable to assessee s PE in India. Notably, at the time of hearing, the Grounds of appeal raised by the Revenue have been reiterated by the Ld. CIT-DR but no specific .....

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the inference of the DRP that the referral fee in question cannot be construed to be in the nature of fee for technical services and that the same is merely in the nature of commission income. (i) Cushman & Wakefield (S) Pte. Ltd., 305 ITR 208(AAR) (ii) CLSA Ltd., vs. ITO (International Taxation), 56 SOT 254(Mum) (iii) ADIT (IT) vs.Star Cruise India Travel Services (P) Ltd., 46 SOT 173(Mum) 6. The stand of the assessee is that considering the fact that the referral fee is in the nature of c .....

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gard to Section 5(2)(b) read with section 9(1)(i) of the Act, the said income is includible in the scope of total income chargeable to tax in India. To put it differently, as per the Assessing Officer, referral fee is deemed to accrue or arise in India and therefore, the same is taxable in India. This has been inferred on the strength of the fact that the fee has been paid by the Indian Company after execution of the work of the referred client based in India and therefore, the source of the fee .....

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ical or other personnel, but does not include consideration for any construction, assembling, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head salaries . At this stage, we may briefly touch upon the nature of the impugned referral fee earned by the assessee. The relevant discussion in the orders of the authorities below reveal that CSDB referred an India resident client to the investment banking division of the I .....

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per the Assessing Officer, the referral fee has been paid by the Indian Company after the execution of the work of the referred client. Merely because the fee was payable by the Indian Company to CSDB after execution of the work of the referred client is no ground to determine the nature of the payment. In this context, the Authority for Advance Rulings in the case of Cushman & Wakefield(S) Pte. Ltd., (supra) has dealt with a somewhat similar situation, wherein the applicant was a resident o .....

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lso referral fee earned by a non-resident assessee from an India based entity for referring certain international clients was held not to be in the nature of fees for technical services within the meaning of Section 9(1)(vii) of the Act. Notably, the aforesaid decisions have also been referred and relied upon by the DRP in concluding that the referral fee is in the nature of commission to be taxed as business income and not as fees for technical services . In the course of hearing before us, no .....

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