TMI Blog2022 (12) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... of managerial services, it cannot be treated as FTS in view of the restrictive meaning of FTS under Article 13(4) of India-UK tax treaty, which specifically excludes managerial services. As regards the applicability of MFN clause and the restrictive provision of India-UK tax treaty, in our view, there cannot be any dispute as the Assessing Officer has accepted the legal position. Whether 50% of the amount received can be treated as FTS under India- UK DTAA? - Article 13(4)(c) of India-UK tax treaty says that if in course of rendering services the service provider makes available technical, knowledge, experience, skill, knowhow, or processes etc then it can be regards as FTS. The expression make available has not been defined either under the treaty provisions or under the Act. The expression make available has been judicially interpreted in various decisions. As per the ratio laid down make available would mean imparting of technical knowledge, skill, knowhow, etc. which enables the recipient of service to apply such technical knowledge, experience, skill, knowhow etc. independently in exclusion of the owner of such technical knowledge, experience, skill, knowhow etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 12(3)(b) of the India-Belgium tax treaty, FTS includes payment received for services of managerial, technical or consultancy nature and chargeable to tax @10%. However, the assessee submitted, the taxation of FTS under India-Belgium tax treaty can be altered or reduced on account of Most Favoured Nation (MFN) clause as referred to in clause (1) of the protocol to the India-Belgium tax treaty. He submitted, as per the said protocol to India-Belgium tax treaty, where India enters into a tax treaty after 01.01.1990 with a third state, being a Member of the OECD, whereby vide such DTAA India limits its taxation in respect of royalty or FTS to a rate lower or a scope more restricted than the rate or scope provided in India-Belgium tax treaty of such item of income, the same rate or scope as provided for in the other tax treaty in respect of said item of income shall also apply under the India-Belgium tax treaty. It was submitted, as per India-UK tax treaty, under Article 13(4) the term FTS has been defined to mean consideration received for rendering of any technical or consultancy services. Thus, it was submitted, managerial services have been specifically excluded from the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planning, logistics and reporting, client contract and preferred provider agreement, finance and accounting system, human resource services, information system, corporate communication, legal services, etc. actually enable the recipient to apply the knowledge received. Alleging that segmental details of cost charged for various services are not available, he attributed 50% of the receipts are for consultancy services, hence FTS. Against the aforesaid decision of learned Commissioner (Appeals), the assessee is before us. 5. Reiterating the stand taken before the Departmental Authorities, learned Counsel submitted that the services rendered are simply in the nature of managerial services, hence, cannot be regarded as consultancy services. He submitted, as per the MFN clause available in the Protocol to India-Belgium tax treaty, the more restricted meaning of FTS under India-UK tax treaty would be applicable. He submitted, as per Article 13(4) of the India-UK tax treaty, managerial services are specifically excluded from being treated as FTS. Therefore, he submitted, the amount received by the assessee, being in the nature of managerial services, is not taxable in India. Without pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. SCA Hygiene Products AB ITA No. 7315/Mum/2018 17. Exxon Mobil Company India (P) Ltd. (2018) 92 taxmann.com 5 18. Raymond Ltd. vs. DCIT (86 ITD 791) 19. National Organic Chemical Industries Ltd. vs. DCIT (2004) (96 TTJ 765) 20. NTT Asia Pacific Holdings Pte Ltd. vs. ACIT (ITA No.1212/Mum/2021) 21. Endemol India Private Limited (264 CTR 117) 22. Trigo SAS vs. DCIT (TS-855-ITAT-2021 (PUN)) 23. GRI Renewable Industries S.L. vs. ACIT(IT) (ITA No. 202/PUN/2021) 6. Strongly relying upon the observations of the Departmental Authorities learned Departmental Representative submitted that the services rendered by the assessee under the MSA cannot be regarded as simply in the nature of managerial services. Drawing our attention to various clauses of the MSA, as reproduced in the order of learned Commissioner (Appeals), he submitted, some of the services rendered by the assessee are in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enjoyment of the property for which a payment described in paragraph 3(b) of the Article is received; or c) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design. While the Assessing Officer has treated the services rendered by the assessee to be in the nature of consultancy services, learned Commissioner (Appeals) has partly accepted assessee s claim by attributing 50%of the amount received to FTS. 10. At this stage, we have to examine the scope of services performed under the MSA. On going through a copy of the agreement placed at page 130 of the Paper Book it is observed that the assessee provides management support services to the Indian subsidiary. Paragraph 1 of the agreement provides that the assessee shall provide assistance to the Indian subsidiary in administration, management, marketing and sale of company s products and services including but not limited to business planning, product management, business development, market and manufacturing strategy, logistics and distribution planning, personnel and human resources management. Paragraph 2 to the agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have held that the nature of services provided by the assesse do not give any impression that they are not in the nature of managerial services. Even, assuming that part of such services are in the nature of consultancy services, as held by learned Commissioner (Appeals), it has to be seen whether it qualifies as FTS under India-UK DTAA, under which, the meaning of FTS is more restrictive than what is provided under India-Belgium tax treaty. As discussed earlier, Article 13(4)(c) of India-UK tax treaty says that if in course of rendering services the service provider makes available technical, knowledge, experience, skill, knowhow, or processes etc then it can be regards as FTS. The expression make available has not been defined either under the treaty provisions or under the Act. However, the expression make available has been judicially interpreted in various decisions. As per the ratio laid down make available would mean imparting of technical knowledge, skill, knowhow, etc. which enables the recipient of service to apply such technical knowledge, experience, skill, knowhow etc. independently in exclusion of the owner of such technical knowledge, experience, skill, knowho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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