TMI Blog2019 (7) TMI 1750X X X X Extracts X X X X X X X X Extracts X X X X ..... ULINGS] , it is found that the nature of services in this case are such that the technical knowledge, skills, etc., was not passed on and did not remain with the recipient of the service. Nature of services rendered in this case is found to be identical with the services rendered in the case of Ernst Young (P). Ltd. [ 2010 (3) TMI 108 - AUTHORITY FOR ADVANCE RULINGS] , relied upon by the Applicant. Applicant while rendering the services as per agreement did not make available the technical knowledge and the experience possessed by it. Thus we hold that the consideration paid for services rendered by the applicant is not covered by fee for technical services in terms of Article 13.4 of Indo-UK Tax Td. Ruling:- Ques.1 The payment receivable by the Applicant from DTZ International Property Advisers Private Limited (hereinafter referred to as DTZ India ) for various services in terms of the services agreement dated 17th February 2011 is not in the nature of Fee for Technical Services under Article-13.4 of India-UK Tax Treaty as the services rendered by the non-resident company do not meet the requirement of make available under the Treaty. The payment will also not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (C W India)], a company incorporated in India and having its office at Gurgaon. DTZ India is a wholly owned subsidiary of the Applicant and is engaged in providing gamut of real estate solutions ranging from site selection, transactions, design building, construction, consultancy and valuation, administrative services etc. DTZ India currently functions in four verticals namely Project Management, Occupational Developmental Management, Investment Advisory and Valuation. The Applicant has stated that the service agreement with DTZ India is a comprehensive global service agreement which is executed uniformally by DTZ UK with all the DTZ group companies and that all the services mentioned in the service agreement may not be rendered to DTZ India. It was submitted that certain services including training services were not presently availed by DTZ India. 5. DTZ India has entered into the service agreement with DTZ UK for availing intra-group services provided by DTZ UK in order to make optimum use of available resources within the DTZ Group to increase efficiency and reduce cost. The Applicant has submitted that it does not have a place of management, a branch, an office or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The Applicant submitted that as per Article 7 of India-UK DTAA, the amount payable by DTZ India to DTZ UK may be considered as business income. However, the activity of rendering service was carried out by DTZ UK in UK only. DTZ UK did not have any office, branch, place of management, factory, workshop or any other place of business in India, as mentioned in Article 5(2) of India-UK DTAA, so as to constitute a PE of DTZ UK in India. It was submitted that the Applicant did not have any PE in terms of Article 5(1) read with Article 5(2) of India-UK DTAA. 9. It was further submitted that DTZ India did not constitute agency PE of the Applicant under Article 5(4) of the India-UK DTAA because DTZ India was acting in its ordinary course of their business and not as an agent of the Applicant. Further, DTZ India was not carrying out any of the activities mentioned in clause 4 of the Article 5 of the India-UK DTAA, i.e. DTZ India or any of its employees did not secure order or conclude contracts for and on behalf of DTZ UK, neither did DTZ India or its employees exercised any authority to conclude contract in the name of the Applicant. DTZ India did not maintain in India any stock of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deploy similar technology or techniques without DTZ UK since DTZ India did not acquire any technology required to render these services. Thus, none of the services can be said to be made available by DTZ UK. Further, the services also did not entail development and transfer of a technical plan or technical design. The Applicant relied upon the following decisions in support of its contention that the services as rendered do not satisfy the condition of make available : (a) Raymond Ltd. v. DCIT [2003] 86 ITD 791 (Mumbai) (b) Intertek Testing Services India (P) Ltd., In re [2008] 175 TAXMAN 375 (AAR New Delhi) (c) Ernst Young (P) Ltd., In re [2010] 189 TAXMAN 409 (AAR New Delhi) (d) CIT v. De Beers India Minerals Pvt. Ltd. [2012] 21 taxmann.com 214 (Karnataka) 12. The Applicant contended that on the facts and circumstances of the case the payment received by it from DTZ India under the service agreement was not liable to tax in India in accordance with the India-UK DTAA. It was further submitted that since the payment in respect of the services under the service agreement fees did not result into any sum chargeable to tax under the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t services continued for a period of time and hence make available test was not satisfied. It was submitted by the applicant that the advice/service were all continuous and cannot be said to make available any technical knowledge or skill. The revenue contended that just because the advice/service was continuous, it cannot be said that the technology was not made available. If it was a prolonged discussion, the technical skill was made available for a longer period of time. Once some issues were discussed with employees of C W India and solutions were suggested, the employees of C W India gained the technical knowledge of resolving that issue in future independently. If that issue came up again, he could solve it on his own. The service provided was continuous because new issues keep coming up every now and then, but that does not mean that service recipient does not learn from the previous work. It was submitted that the knowledge and expertise of the applicant was also getting updated and hence, there was need to share it with C W India on a continuous basis and thus, the make available test was satisfied. The revenue relied upon the following decisions in support of the contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 5(1) read with Article 5(2) of India-UK DTAA and that DTZ India did not constitute agency PE of the applicant under Article 5(4) of the treaty. This being the stated position, this ruling will apply provided that the applicant has no PE in India. 17. Article 13 of Indo-UK convention defines royalties and fees for technical services. As per the definition in Article 13.3 of the convention the term royalties means: (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. There is no dispute to the fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsidiaries for shared benefit through economies of scale and an equitable distribution of cost and charges amongst the parties. There are ten types of services categorized in the schedule and it was clarified that all the services were not availed. We have looked into the services detailed in the schedule to the Agreement with which we are concerned. In the course of hearing the Learned Counsel of the Applicant was required to provide full description of each constituent of the intra-group of service by explaining what was the nature of service and how it got rendered to C W India. The applicant was also required to provide evidence of rendering services and if it was done through e-mail, a copy of such e-mail was called for. The applicant vide letter dated 15.02.2018 provided the following details in this regard:- Brief description of various services provided by the Applicant to C W India is as under: (i) Information system services; The objective of the Global Information System team is to ensure the efficient and effective operation of the Group s Information System Operating Platform. It includes the following services: Development of Global Information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or players in the real estate industry and accordingly have developed and reinforced relationships with key clients over the years. Since, lot of these key clients also have presence in India, C W India leverages these relationships to generate business in India. The media and marketing policies developed by C W UK are useful for C W India in conducting its marketing in India (including presentation of the DTZ website). The C W UK also support C W India with brochures and other marketing material for which C W India communicated through emails. Sample evidences in relation to rendition of such services are attached at Anneuxre-3. (iii) Human Resource services: The provision of human resource support aims at developing strategy and ensuring that globally consistent policies and procedures are adopted, in particular through the following activities: Development of Global Human Resources strategy, policies and procedures. Development of Global Human Resources systems Development, governance and administration of Global Share Scheme Enhancing capabilities in recruitment, development and retention of talent Support in respect of retention and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to tax-related issues. Evidence of rendition of services: It is submitted that C W UK provides finance related services by way of inter alia, financial management reporting template for C W India to manage and understand its business (pricing) and enable comparison with C W UK s global business, through emails and telephonic conversations. Sample evidences in relation to rendition of such services by way of email correspondence are attached at Annexure-5. (vi) Global Procurement services: Global Procurement services encompass the following: Identification and monitoring of cost saving opportunities Advice on potential cost reduction opportunities Identification of global suppliers to reduce costs and improve service levels Evidence of rendition of service: Sample evidences, i.e. email correspondence in relation to rendition of such services by way of email correspondence are attached at Annexure-6. (vii) Risk and Compliance: The Global Risk and Compliance function aims to reduce risk across the group therefore improving client service and reducing costs, such activities mainly consist in: Developing global risk ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure 2.2 Email sent to DTZ India containing the India Research budget for financial year 2011-12 along with important notes and parameters used for preparing the same by overseas DTZ office. Annexure 2.3 Email sent by the Applicant to global finance teams containing Global Finance-Transformation Update. This file contained the recent developments of Group Finance including setting up of a Shared Services Centre to ensure centralized operations of various function such as sales ledger, purchase ledger, cash and banking, balance sheet control and management report production for the DTZ Group. Global Procurement Annexure 3.1 Email chain between the Applicant and DTZ India evidencing co-ordination by the Applicant with vendors in India for testing and procurement of synchronization software for use by DTZ India. Global information Systems Annexure 4.1 Email chain between the Applicant and DTZ India for purchasing Microsoft Office Professional for DTZ India Anne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... skill and expertise is not passed on. 22. The revenue has contended that the applicant did not give the complete documentary evidence i.e. e-mail correspondences for one month as directed by the Authority. On the other hand, the applicant has submitted that it has made available the complete evidences as available with him. What was required to be provided by the applicant was the copy of complete e-mails of a particular month pertaining to services rendered in that month. Obtaining the entire e-mail correspondence for a month, which are not connected with the services rendered, will have no relevance as we have to only examine the correspondence pertaining to the services rendered. The applicant has certified vide its submission dated 28/06/2019 that the complete trajectory of e-mail correspondences for various categories of services rendered to DTZ India has been provided by him. The applicant has provided evidence in respect of all ten categories of services provided. It has also filed a status on the particular sub-category of service availed or not availed by the recipient vide submission dated 28.06.2019 (Annexure-1 to that letter), as under: S.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B7 Annual group consolidated accounts prepared and filed for statutory purposes Not Availed B8 Annual budgeting; quarterly and long term forecasting and budgeting to ensure group resource is focused to where it is required Availed B9 Monitoring, accounting and recharging of group central costs Availed B10 Treasury management Availed B11 Maintenance and Training for Cognos Maintenance services availed. However, no training services availed. B12 Development and monitoring of Financial Control Policy and Global Tax Policy Availed B13 Global Tax Support to ensure that corporate income tax is minimized globally, also assistance with local issues and ensuring that cross border transactions are undertaken at arm s length prices Availed C Global Procurement C1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Availed E2 Development of Global Human Resources systems(eg. CRD,ODP s) Availed E3 Development, governance and administration of global share scheme Not Availed E4 Enhancing capabilities in recruitment, development and retention of talent Availed E5 Supporting the parties with retention and restructuring needs Availed E6 Supporting the parties with employee grading-consistent quality across the firm Availed E7 Working with suppliers to improve services and reduce costs Availed E8 Development of Global Training and Learning programmes Availed E9 Global mobility administration- inbound and outbound Not Availed E10 Global resource management Not Availed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements Not Availed G7 Investigation of control breakdowns Not Availed G8 Board and Executive management reporting Not Availed H Global Client Management H1 Create and maintain key client contact mapping by country and skill Availed H2 Create standardised pitch materials, content library and training programme Availed H3 Create new sales management and client planning processes, tools, systems to improve productivity Availed H4 Global business win training Not Availed H5 Manage and support Global business planning process Availed I Consultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for providing high quality, high resolution, geophysical data regarding diamond bearing mineral deposits. It had given data, photographs and maps to assessee but had not made available technical expertise, skill or knowledge in respect of collection or processing of data to the assesse. On the basis of these facts the Court held that the assessee could not independently apply the technical expertise, skill or knowledge and undertake such survey independently in future, excluding and without assistance of the Dutch company and, therefore, it did not satisfy requirements of technical services as contained in article 12 of Indo-Dutch DTAA. The Hon ble Court considered the term make available and explained it as under: 22. What is the meaning of make available . The technical or consultancy service rendered should be of such a nature that it makes available to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particular contract comes to an end. The services offered may be the product of intense technological effort and a lot of technical knowledge and experience of the service provider would have gone into it. But that is not enough to fall within the description of services which make available the technical knowledge, etc. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in future without depending on the provider. In fact the revenue has also relied upon this decision. While interpreting the term make available the Authority had held that though the applicant had not furnished details of exact services provided by ITM, on a broad analysis it was found that majority of services were in nature of technical or consultancy services, but most or many of them did not 'make available' to applicant technical knowledge, experience, skill, know-how, etc., possessed by provider of services. The nature of services rendered in this case were 'corporate head office services'; 'divisional global services'; and 'divisional regional services' wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s informations on various business and commercial matters, guidelines, templates, best practices and strategies that could be adopted in various spheres of their business which ultimately lead to protection of EY image and client relations. Dissemination of informations, furnishing guidelines and suggesting plans of action aimed at uniformity and seamless quality in business dealings of participating group entities do not per se amount to making available to them technical knowledge and experience possessed by EMEIA to a substantial extent. There is no transfer of technical know-how in that process nor can it be said that the recipient of these coordinated/centralized services has been enabled to apply the technology which EMEIA is possessed of. In fact, EMEIA has not developed any technology of its own nor does it innovate anything. 27. In the present case also the Applicant while rendering the services as per agreement did not make available the technical knowledge and the experience possessed by it. On the other hand in the case of Shell India Marketing Private Limited (AAR) 2012-LL-0117-28, relied upon by the Revenue, Shell India was receiving General Business Support Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India. It was held by the AP High Court that the advice given to procure loan to strengthen finances was a technical or consultancy service, which was upheld by the Supreme Court. As this decision was based on a different specific issue and the clause of make available was not involved therein, the ratio of this decision cannot be applied to the facts of the present case. Similarly, the facts in the case of Continental Construction Ltd. (195 ITR 81) (Supreme Court) relied upon by the revenue is also found to be totally different. The issue involved in this case was deduction u/s 80HHB and u/s 80O of the Act. The fact of the other decisions relied upon by the revenue are also found to be different and distinct from the facts of the present case. 30. In view of the foregoing discussions, we hold that the consideration paid for services rendered by the applicant is not covered by fee for technical services in terms of Article 13.4 of Indo-UK Tax Td. 31. The questions raised by the applicant are answered as under: Ques.1 The payment receivable by the Applicant from DTZ International Property Advisers Private Limited (hereinafter referred to as DTZ India ) for var ..... X X X X Extracts X X X X X X X X Extracts X X X X
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