TMI Blog2022 (12) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Therefore, applying the very same reason on the basis of which we have held the amount received towards consulting engineering services to be not in the nature of fees for technical services as discussed above, we hold that the amount received towards cost recharge cannot be brought to tax in India in the absence of PE. Therefore, the additions made by the Assessing Officer are hereby deleted. - Decided in favour of assessee. - ITA No.1690/Mum/2022 - - - Dated:- 19-12-2022 - Shri Aby T Varkey, Judicial Member And Shri M.Balaganesh, Accountant Member For the Assessee : Shri Vijay Mehta For the Revenue : Shri Sunil Umap ORDER PER M. BALAGANESH (A.M): This appeal in ITA No. 1690/Mum/2022 for A.Y.2019-20 preferred by the order against the final assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel-III, Mumbai (DRP in short) u/s.144C(5) of the Act dated 30/03/2022 for the A.Y.2019-20. 2. The assessee has raised the following grounds of appeal before us:- Ground No. I- Taxability of amount received for Consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineering and consultancy services for various buildings and projects in India to Buro India and other clients. Buro India enters into agreements with various Indian clients for design and consultancy services in relation to various projects. Typically, Buro India renders designing and engineering services to its client. However, wherever it does not have the requisite expertise or requires highly specialized services like master planning, Acoustics Engineering, Environmental Engineering etc, then the said services are availed from the assessee company. Since these are specialized services and Buro India is not in a position to provide these services independently, hence on a year on year basis, they avail services from the assessee to different projects / buildings. Typically, for each of the project of Buro India, it enters into a specific agreement with assessee, based on the services required. It was submitted that services provided by assessee to Buro India does not make available any technical knowledge or skill etc and accordingly the services would not qualify as fees for technical services under the India-UK Tax Treaty (DTAA in short) and the same should be characterized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole group, including managing the international tax position and managing the financial position at the group level Human Resource Management The team based in UK provides support to the HR teams of group entities in the following gtanner providing consultancy when required setting developing and monitoring HR policies, and assisting with performance and disciplinary issues. Corporate and Commercial Services: The central legal team assists the worldwide group entities by dealing with specific legal issues, reviewing compliance with legal regulations, and dealing with employment and property law matters Operations. This team is engaged in performing the strategic and operational management function at the group level Project Management Function. These functions benefit the group as a whole. These includes project management IT systems, quality assurance etc. The above services would qualify as managerial services. However, we would like to highlight that Article 13 of India-UK DTAA covers only technical and consultancy services and hence the above services would be qualified as business income and in the absence of Permanent Establishment (PE) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this tribunal in AY 2012-13 in ITA No. 1296/Mum/2017 dated 15/02/2019 wherein it was held as under:- 14. We have considered rival submissions and perused material on record. We have also applied our mind to the decisions relied upon by both the parties. The core issue which needs to be addressed is, whether the amount received by the assessee towards supply of technical designs, drawings, plans, etc., under the consulting engineering services is to be treated as fees for technical services under the India-UK tax treaty. Once this issue is decided, the issue whether cost recharge is in the nature of fees for technical services will automatically get resolved since both the Assessing Officer and learned Commissioner (Appeals) have treated it as fees for technical services on the reasoning that such cost recharge is ancillary and incidental to consulting engineering services. 15. There is no dispute between the parties that the assessee being a tax resident of UK is governed under India-UK tax treaty and if the treaty provisions are more beneficial, they will apply to the assessee in terms with section 90(2) of the Act. From the assessment stage itself, the assessee has ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and conditions as enumerated in Article-13(2) of the India-UK tax treaty. Since, in the present appeal the departmental authorities have treated the amount received by the assessee as fees for technical services, we have to look to the meaning of fees for technical services under India-UK tax treaty. Article-13(4) of the India-U.K. tax treaty defines fees for technical services as under:- 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term fees for technical services means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received ; or (b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received ; or (c) make available technical knowledge, experience, skill know- how or processes, or consist of the development and tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained therein independently as an owner without depending upon the service provider. The recipient of technology should be able to make use of technical knowledge, experience, skill, knowhow or processes by himself in his business or for his own benefit and without recourse to the service provider in future and for this purpose a transmission of the technical knowledge, experience, skill, knowhow or processes, from the service provider to the service recipient is necessary. In other words, the technical knowledge, experience, skill, knowhow or processes, must remain with the service recipient even after rendering of the services has come to an end. The service recipient must be at liberty to use the technical knowledge, experience, skill, knowhow or processes in his own right. Undisputedly, in the present case, as revealed from the material on record, the technical design/drawings/plans supplied by the assessee to the Indian entity are project specific, hence, cannot be used by the Indian entity in any other project in future. Therefore, the claim of the assessee that it has not made available any technical knowledge, experience, skill, knowhow or processes while developing and sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge would also fail, since, they have treated it as ancillary and incidental to consulting engineering services. The, contention of the learned Departmental Representative that the cost recharge fails various tests, such as, need test, benefit test etc. is unacceptable, it is contrary to the finding of the Departmental Authorities. Once, the Departmental Authorities have treated the amount received towards cost recharge to be in the nature fees for technical services, it implies rendering of service by the assessee. Therefore, applying the very same reason on the basis of which we have held the amount received towards consulting engineering services to be not in the nature of fees for technical services as discussed above, we hold that the amount received towards cost recharge cannot be brought to tax in India in the absence of PE. Therefore, the additions made by the Assessing Officer are hereby deleted. The assessee succeeds in both the grounds. 22. In the result, assessee's appeal is allowed. 6.1. We find that this tribunal for the AY 2014-15 in ITA No. 7111/Mum/2017 dated 13/11/2019 and for the AY 2015-16 in ITA No. 834/Mum/2019 dated 30/12/2020 had restored the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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