BAIN AND COMPANY,USA V. DCIT, GURGOAN

ITA 3056/DEL/2023

AI Insights

Bain and Company, a foreign consultancy firm, appealed against the orders of the Assessing Officer which had assessed their income from various services provided to their Indian subsidiary, Bain & Company India Private Limited, as taxable under the head 'Fees for Included Services' (FIS) under the India-USA DTAA. The services in question included management consultancy, professional support, and reimbursements of expenses. The Tribunal examined whether these services were technical in nature and whether they made available any technical knowledge or skills to Bain India, which would qualify them as FIS under the DTAA. The Tribunal relied on previous decisions and the specific nature of the services provided to conclude that the services did not meet the criteria for FIS under the DTAA.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716629 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 27-10-2023
• Other Referred Cases: GVK Industries vs ITO, CBDT vs Oberoi India (P) Ltd, Continental Construction Ltd vs CIT, Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-tax, CIT v. Relx, Inc., CIT v. Springer Nature Customer Services Centre GmbH
• Laws Referred To: Income-tax Act, 1961, India-USA Double Taxation Avoidance Agreement
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: EKTA JAIN
• Assessee Lawyers: HIMANSHU SINHA; THIS
• Keywords: Rule of consistency; Wholly owned subsidiary; Double taxation relief
• Section: 143(3); 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023 [A.Y 2021-22] Bain and Company Vs. The Dy. C.I.T, 131, Dartmouth Street Boston Circle Massachusetts, USA International Taxation --- Gurgaon, Haryana 5th Floor, Building No. 8A DLF Cyber City DLF City, Phase-II Gurgaon, Haryana PAN : AACCB 8671 R (Assessee) (Respondent) Assessee By : Shri Himanshu Sinha, Adv. Shri Prashant Meharchandani & Shri Jainender Kataria, Advs. Department By : Ms. Ekta Jain, CIT- DR Date of Hearing : 27.05.2025 Date of Pronouncement : 22.08.2025 ORDER PER NAVEEN CHANDRA, AM :- Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 2 of 28 These two captioned appeals by the assessee are directed against the order u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 [the Act, for short] dated 31.03.2023 for A.Y 2020-21 and dated 28.08.2023 for A.Y 2021-22. ITA No. 1677/DEL/2023 [A.Y 2020-21] 2. Grounds raised by the assessee read as under: 1.That the Ld. Assessing Officer ('AO') erred on facts and in law in assessing the income of the Appellant at Rs. 144,48,50,120/- vide Final Assessment Order dated 31 March 2023 as against the returned income of Rs.27,57,87,110/- declared by the Appellant. GROUNDS PERTAINING TO MANAGEMENT CONSULTING SERVICES 2.That the Ld. AO/ Dispute Resolution Panel ('DRP') erred on facts and in law in holding that the fee for management consulting services amounting to Rs.49,79,77,135/-received by the Appellant from Bain & Company India Private Limited, its wholly owned subsidiary (hereinafter referred to as 'Bain India') is in the nature of 'Fees for Included Services' ('FIS') under Article 12(4)(a) of the India-USA Double Taxation Avoidance Agreement ('DTAA') without appreciating that management consultancy services are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement. 3.That the Ld. AO/DRP erred in characterizing management consultancy services as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case. Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 3 of 28 4. That the Ld. AO/DRP erred on facts and in law in holding that the management consultancy services provided by the Appellant to Bain India under consulting service agreement are FIS under Article 12(4)(b) of the DTAA failing to appreciate that these services are not technical in nature and does not make available' any technical knowledge, know- how, skill, etc. to Bain India as contemplated under the DTAA. GROUNDS PERTAINING TO REIMBURSEMENT OF THIRD-PARTY VENDORS 5. That the Ld. AO/ DRP erred on facts and in law in holding that the reimbursements of Rs. 11,64,85,266/- received by the Appellant from Bain India under cost reimbursement agreement are in nature of FIS under Article 12(4)(a) and Article 12(4)(b) of the DTAA without appreciating these payments are mere reimbursement of expenses on account of services provided by third party incurred by the Appellant for and on behalf of Bain India, without any mark-up or service element. 6. That the Ld. AO/ DRP erred on facts and in law in holding that the reimbursements of received by the Appellant from Bain India under cost reimbursement agreement are in nature of FIS under Article 12(4)(a) of the DTAA without appreciating that the activities in relation to such reimbursement are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement. 7. That the Ld. AO/DRP erred in characterizing the reimbursement on account of third- party vendors as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case. 8. That the Ld. AO/ DRP erred on facts and in law in not appreciating that the services in relation to such reimbursement are provided by third party vendors which are in the nature of provision of secondary Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 4 of 28 information and are non-technical in nature and does not make available' any technical knowledge, know-how, skill, etc. to Bain India as contemplated under Article 12(4)(b) of the India-USA DTAA. 9. That the Ld. AO/DRP erred on facts and in law in not following the principles of judicial propriety by disregarding the decision of this Hon'ble Tribunal rendered in the case of Bain India wherein it was held that reimbursements made by Bain India to the Appellant on account of third-party vendors are not taxable in India and thus not liable to tax deduction. GROUNDS PERTAINING TO REIMBURSEMENT OF MISCELLANEOUS EXPENSES 10. That the Ld. AO/DRP erred on facts and in law in holding that the reimbursements of Rs.22,09,57,384/- received by the Appellant from Bain India are in nature of FIS under Articles 12(4)(a) and 12(4)(b) of the DTAA without appreciating that these payments are mere reimbursement of expenses incurred by the Appellant for and on behalf of Bain India, without any mark-up or service element. 11. That the Ld. AO/DRP erred on facts and in law in treating the reimbursements of Rs.22,09,57,384/- received by the Appellant from Bain India as FIS under Article 12(4)(a) of the DTAA without appreciating that the activities in relation to such reimbursement are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement. 12. That the Ld. AO/DRP erred in characterizing the reimbursement as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case. 13. That the Ld. AO/ DRP erred on facts and in law in not appreciating that the payments made for which such reimbursements were made were not in lieu of any technical knowledge, know-how, skill, etc. made Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 5 of 28 available to Bain India and thus, would not qualify as FIS under Article 12(4)(b) of the India-USA DTAA. 14. That the Ld. AO/DRP erred on facts in not taking cognizance of the documentary evidence submitted by the Appellant to substantiate the cost-to-cost reimbursements received by the Appellant. 15. That the Ld. AO/DRP erred on facts and in law in holding that the receipt of reimbursements of expenses from Bain India have no independent existence and the reimbursement are related to the consultancy and support services rendered by the Appellant to Bain India. GROUNDS PERTAINING TO SUPPORT SERVICES 16. That the Ld. AO/DRP erred on facts and circumstances of the case and in law in holding that the payment received for provision of support services under the support services agreement amounting to Rs.33,36,43,225/- are FIS under Article 12(4)(a) of the DTAA without appreciating that these are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement. 17. That the Ld. AO/DRP erred in characterizing the support services as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case. 18. That the Ld. AO/ DRP erred on facts and in law in concluding that the support services provided by the Appellant to Bain India under the support service agreement are consultancy in nature. 19. That the Ld. AO/DRP erred on facts and in law in holding that the support services provided by the Appellant to Bain India under the support service agreement are FIS under Article 12(4)(b) of the DTAA Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 6 of 28 failing to appreciate that these services are not technical in nature and does not 'make available' any technical knowledge, know-how, skill, etc. to Bain India as contemplated under the DTAA. 20. That the Ld. AO/DRP erred on facts and in law in holding that the Appellant has accepted similar additions in the past assessment years while opting to settle the past years' appeals under Direct Tax Vivad Se Vishwas Scheme. 21. That the Ld. AO erred on facts and in law in charging interest under Section(s) 234A and 234B of the Act. 22. That the Ld. AO erred on facts and in law in initiating penalty proceedings under section 274 read with section 270A of the Act. 3. Facts of the case, in brief, the Assessee is a foreign company and is a tax resident of the USA amenable to Indo-USA DTAA. It is engaged in the business of providing consultancy services to multinational companies, which include areas such strategy, performance improvement, organization enhancement, mergers & acquisitions, and private equity. The Assessee also provides support services to its subsidiaries, for which it is compensated at an arm's length basis. 4. The Assessee has an Indian subsidiary M/s Bain India with which it has entered into the following agreements which are summarised below: i) Royalty Agreement dated June 1, 2006 as per which the Assessee has granted Bain India the right to use its intangible asset base which includes the brands registered in the name of the Assessee and Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 7 of 28 worldwide databases. In lieu of this, the Assessee charges royalty at the rate of 5% of the accrual basis revenue served for management consulting services provided by Bain India. ii) Consultancy Services Agreement (\"CSA\") dated April 1, 2010 as per which the Assessee and Bain India agree to provide consultancy services to each other depending on the party which requests the other for assistance in their respective client engagements. As per the CSA, these consultancy services include market research, strategic research and planning, data collection, etc. To provide these services, the Assessee can also outsource some of the work to freelance consultants and agents. The consideration for such services determined under the agreement is also indicative of the reciprocal nature of the arrangement. The fee under the CSA is payable to both the Assessee and Bain India depending on which party has been engaged by the other for a particular client engagement. iii) Cost Reimbursement Agreement (\"CRA\") dated June 01, 2006 as per which the assessee gets receipt of reimbursements from Bain India for the expenses incurred on certain services provided by the Assessee on behalf of Bain India. These reimbursement are on cost-to-cost basis without any markup and Reimbursement on account of third-party cost Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 8 of 28 are actual costs incurred by the Assessee for procuring services of market industry research on behalf of Bain India. iv) Support Services Agreement (\"SSA\") dated April 1, 2010 as per which the Assessee provides support services to other Bain Group companies (including Bain India) so that they may gain access to standardized support services. Support services being rendered through the centralized Bain entity i.e.. the Assessee, helps Bain Group entities realize economies of scale, and other operating and financial efficiencies and function more efficiently increasingly, globalized and competitive scenario, in terms of SSA, the cost incurred by the Assessee for the rendition of service is allocated to Bain India on a cost-to-cost basis (i.e., without any margin/ built-in mark-up) using allocation factors such as revenue, attendance of employees at training seminars, etc. 5. In the instant year, the Assessee had the following receipts from India: (a) Royalty from Bain India- INR 27,57,87,105/- (offered to tax) (b) Receipt for consultancy services provided to Bain India- INR 49,79,77,135/- (claimed as non-taxable) Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 9 of 28 (c) Receipt on account of reimbursement of expenses from Bain India- INR 33,74,42,652/- (claimed as non-taxable) (d) Receipt on account of professional support services provided to Bain India- INR 33,36,43,225/- (claimed as non-taxable) 6. The Assessee offered the royalty receipt as taxable income under the provision of the India- US Tax Treaty (DTAA) read with Section 115A of the Income-tax Act, 1961(Act). The other receipts were not offered to tax due to the availability of treaty benefit under the DTAA. The dispute in the present appeal is limited to receipts on account of consultancy services, professional support services and reimbursement of expenses. 7. The Ld. Assessing Officer (AO) held that the amount received by the Assessee on account of provision of management consultancy services and professional support services are in the nature of fee for included services (FIS) under Article 12(4)(a) of the DTAA as they are ancillary or subsidiary to the enjoyment of rights/information received under the royalty agreement entered between the Assessee and Bain India. Further, the AO treated the reimbursement of expenses also as FIS under Article 12(4)(a) of the DTAA on the basis that reimbursement has no independent existence and is related to either consulting or Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 10 of 28 professional support services and therefore, these are also ancillary or subsidiary to the enjoyment of rights/information received under the royalty agreement. 8. The Ld. AO further held that the receipts from consultancy services and Professional support services as FIS under Article 12(4)(b) of the DTAA, as the Assessee renders these services into highly technical areas of finance, private equity, strategy and therefore these are technical in nature. He further observed that Bain India can utilize the learnings from consultancy rendered by the Assessee to carry out its business with highest quality standards and thus, consultancy services 'make available' necessary know-how, knowledge, experience etc to Bain India. The Ld. AO also relied on the decisions of Hon'ble Supreme Court in the case of GVK Industries vs ITO: [2015] 54 taxmann.com 347; CBDT vs Oberoi India (P) Ltd 97 taxman 453 and Continental Construction Ltd vs CIT 195 ITR 811. 9. With respect to reimbursement of expenses, which was made on two accounts; first, third party costs amounting to INR 11,64,85,266 and second, miscellaneous expenses amounting to INR 22,09,57,384/- the Ld. AO observed that the Assessee failed to provide any evidence to Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 11 of 28 show that these were reimbursed on cost-to-cost basis and that income element is not necessary for taxing a receipt as FIS under the DTAA. The Ld. AO further held that reimbursements do not have independent existence and they are related to some kind of expenses incurred for rendering consultancy or professional support services. Accordingly, the L.d. AO treated the reimbursement of expenditure as FIS under Article 12(4) (b) of the DTAA. 10. The Ld. AO incorporated the directions passed by Ld. DRP and assessed the total income of the Assessee at INR 144,48,50,120/- as against the returned income of INR 27,57,87,110/-. Now the assessee is aggrieved and has come in appeal before us. 11. Before us, on Ground Nos. 2-4 with respect to the receipt of Rs. 49,79,77,135/- as consideration for consultancy services, the ld. counsel for the assessee vehemently stated at the outset, that the issue of characterizing the receipts for 'consultancy services” as FIS under Article 12(4)(b) has been decided in favour of the Assessee by this Hon'ble ITAT in Assessee's own case for AY 2018-19 and AY 2019-20. The facts in AY 2018-19 and AY 2019-20 including the nature of services were identical to the facts in the present year where the amount received for Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 12 of 28 provision of consultancy services during the present year is under the same CSA dated April 1, 2010 which existed in AY 2018-19 and AY 2019- 20. 12. Per contra, the ld DR vigorously relied on the orders of the AO and the DRP. The ld DR however could not controvert the assertion that the facts in the impugned year is identical to the facts of AY 2018-19 and 2019-20. 13. We have heard the rival submissions and have perused the relevant material on record. We find that the coordinate bench of ITAT in assessee’s own case for AY 2018-19 and AY 2019-20 in ITA 567/Del/2022 dated 29.08.2023 has held that the consultancy services rendered by the Assessee to Bain India are not technical in nature and that these services do not make available any technical knowledge, experience, skill, know- how etc. as is the requirement under the DTAA and that the same cannot be treated as FIS under Article 12(4)(b) of the DTAA. The relevant part is as under: 16. So firstly it has to be seen whether the services rendered are of the nature of technical or consultancy. To understand the true import of the expression of technical or consultancy, it is necessary to refer to the Memorandum of Understanding to the Tax Treaty. As per the Memorandum of Understanding, Article Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 13 of 28 12 includes only certain technical and consultancy services. Technical services would mean, services requiring expertise in a technology. Whereas, consultancy services would mean advisory services. The categories of technical and consultancy services are to some extent overlapping, because, a consultancy service could also be a technical services. However, the category of consultancy services also includes an advisory service, whether or not expertise in technology is required to perform it. The nature of services provided under the agreement, such as, client engagement, market research, strategic research and planning etc., in our view, certainly, do not fall under the category of technical services. 17. Further, even assuming that they fall under the category of consultancy services, however, the most crucial condition to be satisfied to qualify as FIS under Article 12(4)(b) is the make available condition. In the facts of the present appeal, the departmental authorities have not brought any material on record to demonstrate that while rendering services, the assessee had made available technical knowledge, expertise, skill, knowhow etc. to Bain India to apply such technology, knowhow etc. independently without the aid and assistance of the assessee. The fact that Bain India is still dependent on the assessee for such services is established from the fact that since the year 2010, the assessee had been providing such services to Bain India on year to year basis. Had assessee made available the technical knowledge, knowhow skill etc. to Bain India, there would not have been any occasion for the assessee to provide such services on year to year basis as the making available or transfer of such technical knowledge, knowhow, skill etc. would have enabled Bain India to apply them on its own without requiring the assessee to continue with providing them. 18. It is further relevant to observe, as per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receip cannot be treated as FTS merely because the service provider Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 14 of 28 while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the America Company is not making available to the Indian Company, a technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, keeping in perspective the aforesaid factors as well as the ratio laid down in the judiciary precedents cited before us, we have hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA We order accordingly. Respectfully following the ITAT decision as above, we are of the considered view that in the present case, none of the conditions provided in DTAA were satisfied and following the principle of consistency, consultancy services rendered by the Assessee to Bain India are not technical in nature cannot be treated as FIS under Article 12(4)(b) of DTAA and accordingly we direct the AO to delete the said addition. Ground 2 to 4 are allowed. 15. The ld AR, on Ground Nos. 5-15 with respect to the reimbursement of expense pertaining to third party vendors amounting to Rs. 11,64,85,266 and other miscellaneous expenses amounting to Rs. 22,09,57,384/-, submitted that the issue of characterizing the reimbursement of third-party costs as FIS under Article 12(4)(b) has been decided in favour of the Assessee by this Hon'ble ITAT in Assessee's own case for AY 2018-19 and AY 2019-20. The facts in AY 2018-19 and AY Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 15 of 28 2019-20 including the nature of services for which reimbursements were made and the vendors from whom the services were availed by the Assessee were identical in both the years. 16. Per contra, the ld DR vigorously relied on the orders of the AO and the DRP. The ld DR however could not controvert the assertion that the facts in the impugned year is identical to the facts of AY 2018-19 and 2019-20. 17. We have heard the rival submissions and have perused the relevant material on record. We find that the coordinate bench of ITAT in assessee’s own case for AY 2018-19 and AY 2019-20 in ITA 567/Del/2022 dated 29.08.2023 has held that receipts on account of reimbursement are not FIS as under: In ground no.3, the assessee has challenged the addition of Rs.10,98,97,261 as FIS under Article 12(4)(b) of Indian-US DTAA. 20. Briefly, the facts are, in course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee has received an amount of Rs.10,98,97,261 from Bain India towards reimbursement of client related expenses under a cost reimbursement agreement. After calling for the necessary details and examining them, the Assessing Officer concluded that the nature of receipts is FIS under Article Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 16 of 28 12(4)(b) of the Tax Treaty. Accordingly, he added it to the income of the assessee. Though, the assessee raised objections against such addition, however, learned DRP did not interfere. 21. Reiterating the stand taken before the departmental authorities, learned counsel submitted that the receipts are in the nature of reimbursement of actual cost without any mark up. He submitted, the amount represents third party cost incurred by the assessee for procuring services of market/industries research on behalf of Bain India and reimbursements are on cost to cost basis. He submitted, the services provided by the third party to the assessee are industry research services which included services and cost pertaining to call with subject matter and industries research incurred for and behalf of the clients. There is no technical skill or knowhow employed in industries research services. He, thus, submitted, the conditions of section 12(4)(b) of the Tax Treaty are not satisfied. More so, when the assessee is providing such services under cost reimbursement agreement since 2010. He submitted, while deciding the issue relating to the nature and character of very same receipts and whether it requires withholding of tax in case of Bain India, the Tribunal in ITA No. 2845/Del/2016 dated 10th November 2021 has held that receipts being in the nature of cost to cost reimbursement for marketing and other services rendered by third party, is not taxable in India. Therefore, withholding of tax is not required. Thus, he submitted, the decision of the Tribunal squarely covers the issue in favour of the assessee. 22. Learned Departmental Representative relied upon the observations of the Assessing Officer and learned DRP. 23. We have considered rival submissions and perused the material on record. 24. It is observed, while considering the issue relating to the nature and character of identical receipts and whether it requires Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 17 of 28 withholding of tax, the Tribunal in case of the payer i.e. Bain India in assessment year 2009-10, in the order referred to above, has held that the payment cannot be treated either as FIS under Article 12(4)(b) of the Tax Treaty or royalty. Therefore, it was held by the Tribunal that there was no requirement on the part of the payer i.e. Bain India to withhold tax. 25. In our considered opinion, the controversy stands resolved by the aforesaid decision of the Tribunal. Therefore, we hold that the receipts are not in the nature of FIS under Article 12(4)(b) of the Tax Treaty. We order accordingly. Respectfully following the ITAT decision as above, we are of the considered view that in the present case, Reimbursement of 3rd party cost from Bain India to the assessee cannot be treated as FIS under Article 12(4)(b) of DTAA. We are also fortified by the decision rendered by that Hon'ble ITAT in the case of Bain India in ITA No. 2845/Del//2016 (the service recipient in this case) involving identical issue of payments made as reimbursement to Bain Inc. (Assessee in the present case) in which the Hon'ble ITAT had vide its order dated November 10, 2021 held that payment made by Bain India as cost-to-cost reimbursement to Bain Inc. for marketing and other services rendered by third party vendors is not taxable in India and Bain India is not liable to withhold tax on the same. We accordingly direct the AO to delete the said addition. Ground 5 to 15 are allowed. Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 18 of 28 18. The ld AR on Ground Nos. 16-19 with respect to the receipt of Rs. 33,36,43,225/- as consideration for support services, again stated that the issue of characterizing the receipts for 'support services' as FIS under Article 12(4)(b) has been decided in favour of the Assessee by this Hon'ble ITAT in Assessee's own case for AY 2019-20 vide order dated 12.10.2023 passed in ITA No. 1620/Del/2022. The ld AR further stated that the facts in AY 2019-20 including the nature of services were identical to the facts in the present year where the amount received for provision of support services during the present year is under the same SSA dated April 01, 2010 which existed in AY 2019-20. 19. Per contra, the ld DR vigorously relied on the orders of the AO and the DRP. The ld DR however could not controvert the assertion that the facts in the impugned year is identical to the facts of AY 2019-20. 20. We have heard the rival submissions and have perused the relevant material on record. We find that the coordinate bench of ITAT in assessee’s own case for AY 2019-20 in ITA 1620/Del/2022 dated 12.10.2023 has held that receipts on account of support services are not FIS as under: Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 19 of 28 “16. On a detailed analysis of the services rendered, it appears that some of the services rendered may not fall in the category of technical or consultancy services. However, some of the services rendered may fall either under technical or consultancy services.But the most crucial aspect, which requires examination is, whether in course of rendition of such services, the assessee has made available any technical knowledge, know-how, skill etc. to Bain India so as to enable Bain India to employ such technology, know-how, skill etc. without the aid and assistance of the assessee. In this context, it must be borne in mind that the agreement for providing support services was executed between the assessee and Bain India on 1st day of April, 2010. Whereas, the present appeal relates to assessment year 2019-20. Thus, it is patent and obvious that from the year 2010 onwards, the assessee is providing support services to Bain India on regular basis. Had it been a case of transfer of technology from the assessee to Bain India by making available technical knowledge, know-how, skill etc. qua the services performed, it would certainly have enabled Bain India to employ such technical knowledge, know- how, skill etc. in performing such services independently without seeking aid and assistance of the assessee. There would have been no necessity for Bain India to continuously avail such services from the assessee since the year 2010 till the current assessment year. Had it been a case of transfer of technology in such a long duration Bain India certainly would have acquired the technical knowledge, know-how, skill etc. to perform such services on its own, without requiring the assessee to provide them. The very fact that Bain India is still dependent upon the assessee for the support services, establishes the fact that the assessee has not made available technical, know-how, skill etc. relating to such services to Bain India, the service recipient. 17. At this stage, we must also observe that at the time of hearing, learned counsel appearing for the assessee has made a statement at bar that prior to the impugned assessment year, in Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 20 of 28 no other assessment year the Assessing Officer has treated the receipts from support services as FIS and brought it to tax. Thus, on overall consideration of facts and materials on record, we are of the view that the Revenue has not brought on record any materials to establish the fulfillment of make available condition of Article 12(4)(b) of India - USA DTAA. 18. For the sake of completeness, we must observe that in course of hearing, learned Departmental Representative has relied upon a decision of the Coordinate Bench in case of H.J. Heinz Company Vs. ADIT [2019] 108 taxmann.com 473 (Delhi - Trib.). 19. On a careful reading of the said judgment, we find that the decision of the Coordinate Bench is distinguishable on facts as the services rendered in case of that assessee is in relation to manufacture of products. Whereas, in the facts of the present appeal, services rendered are not in relation to any manufacturing activity. In this view of the matter, the receipts cannot be treated as FIS under Article 12(4)(b) of the tax treaty. The Assessing Officer is directed to delete the addition. Respectfully following the ITAT decision as above, we are of the considered view that in the present case, the support services rendered by the Assessee to Bain India do not make available any technical knowledge, experience, skill, know-how etc. as contemplated under the DTAA and that the amount received for provision of support services rendered by the Assessee to Bain India cannot be treated as FIS under Article 12(4)(b) of the DTAA. Accordingly, we direct the AO to delete the addition. Ground 16 to 19 is allowed. Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 21 of 28 21. On Ground No. 20 with respect to tacit acceptability under Direct Tax Vivad se Vishwas Scheme in the past assessment years in relation to CSA and reimbursement of expenses incurred for third-party service provider, the ld AR submitted that in Assessee's own case for AY 2019-20 this hon'ble tribunal in order dated 12.10.2023 passed in ITA No. 1620/Del/2022 has considered the objection raised by the department and negated the said argument. 22. Per contra, the ld DR vigorously relied on the orders of the AO and the DRP. 23. We have heard the rival submissions and have perused the relevant material on record. We find that the coordinate bench of ITAT in assessee’s own case for AY AY 2019-20 in ITA 1620/Del/2022 dated 12.10.2023 has held as under: 20. Before parting, we must observe that while bringing to tax the receipts from business consultancy services and reimbursement of expenses, the Assessing Officer had observed that in respect of similar additions made in earlier assessment year, the assessee had settled the dispute under the Vivad Se Vishwas Scheme, 2020, thereby tacitly accepting the additions. Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 22 of 28 21. In our view, the aforesaid observations of the Assessing Officer is not, at all, relevant for deciding the issue, as, settlement of dispute under the Vivad Se Vishwas Scheme, 2020 cannot be construed to mean a tacit acceptability of the additions, in fact, the aforesaid position stands clarified by the CBDT Circular 09/2020, dated 22nd April, 2020. Respectfully following the ITAT decision as above, we are of the considered view that in the present case that the Assessee option for settlement under the Direct Tax Vivad Se Vishvas Scheme for AY 2011-12 to AY 2014-15, AY 2016-17 & AY 2017- 18 (in relation to payments received under CSA and reimbursement of expenses incurred for third party service providers) does not tantamount to tacit acceptability of the additions by the Assessee on the above issues. 23. Ground No. 21-22 are consequential in nature. 24. In the result the appeal of the assessee is allowed. ITA No. 3056/DEL/2023 [A.Y 2021-22] 25. We find that the facts and grounds of appeal for AY 2021-22 are identical to AY 2020-21, with the exception of the amounts involved and ground no. 2, 21-23 and 25-27. Therefore, the decision rendered for AY 2020-21 are equally applicable to the present year and are not being Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 23 of 28 repeated here for the sake of brevity. We have already held that receipt for consultancy services, receipt for professional services and reimbursement of expenses do not fall under Article 12(4)(a) and Article 12(4)(b) of Indo-USA DTAA and hence the same is not taxable in India. 26. The ld AR with respect Ground No. 2stated that the same is not pressed. The same is therefore dismissed as not pressed. 27. The ld AR on Ground No. 21-23 with respect to receipt of INR 14,57,058 as subscription fee is not liable to tax in India as royalty income under Section 9(i)(vi) of the Act and Article 12 of the DTAA, submitted that during the relevant year, the Appellant had entered into a subscription agreement with Societe to provide Societe a non- exclusive, non-sublicensable and non-transferable right to access and use a platform containing module and content on digital product management. In this regard, the Appellant received INR 14,57,058 from the Societe in the relevant assessment year. The ld AR argued that the Ld. AO has erroneously characterized this receipt of INR 14,57,058/- as royalty income of the Appellant under the DTAA. The ld AR submitted that in terms of Article 12(3) of the DTAA, the term 'royalty' is the consideration for the use or right to use any copyright of a literary, Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 24 of 28 artistic or scientific work relying on the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-tax [2023] 157 taxmann.com 458 (SC). 28. The ld AR argued that in terms of the provisions of the DTAA read with the judicial precedents, 'royalty' shall be constituted only in case where a non-resident gives an India resident party to use or right to use of a copyright. The ld AR placed his reliance on the decision of Hon'ble High Court of Delhi CIT v. Relx, Inc. [2024] 160 taxmann.com 109 (Delhi) wherein it has been held that subscription fee cannot be royalty. Reliance was placed on the decision of Hon'ble High Court of Delhi in CIT v. Springer Nature Customer Services Centre GmbH [ITA 306/2023] where a similar position has been adopted. 29. Per contra, the ld DR relied on the orders of the authorities below. 30. We have heard the rival submissions and have perused the relevant material on record. We find that the law is settled with reference to the concept of ‘royalty’ by the decision of Engineering Analysis Centre of Excellence Private Limited v. Commissioner of Income-tax (supra) where the hon’ble Supreme Court held as under: Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 25 of 28 \"72. However, when it comes to the expression \"use of, or the right to use\", the same position would obtain under explanation 2(v) of section 9(1)(vi) of the Income Tax Act, inasmuch as, there must, under the licence granted or sale made, be a transfer of any of the rights contained in sections 14(a) of 14(b) of the Copyright Act, for explanation 2(v) to apply. To this extent, there will be no difference in the position between the definition of \"royalties\" in the DTAAs and the definition of \"royalty\" in explanation 2(v) of section 9(1)(vi) of the Income Tax Act. 73. Even if we were to consider the ambit of \"royalty\" only under the Income Tax Act on the footing that none of the DTAAs apply to the facts of these cases, the definition of royalty that is contained in explanation 2 to section 9(1)(vi) of the Income Tax Act would make it clear that there has to be a transfer of \"all or any rights which includes the grant of a licence in respect of any copyright in a literary work. The expression \"including the granting of a licence\" in clause (v) of explanation 2 to section 9(1)(vi) of the Income-tax Act, would necessarily mean a licence in which transfer is made of an interest in rights \"in respect of copyright, namely, that there is a parting with an interest in any of the rights mentioned in section 14(b) read with section 14(a) of the Copyright Act. To this extent, there will be no difference between the position under the DTAA and explanation 2 to section 9(1)(vi) of the Income Tax Act. 30. We are inclined to agree with the assessee that the decision of hon’ble Delhi High Court in CIT V Relx Inc supports the case of the assessee wherein it was held as under: \"11. We find that similar would be the position which would obtain when subscription fee is examined on the anvil of article 12 of the DTAA. If the Department were to describe subscription fee as 'royalty' they would necessarily have to establish that the payments so received by the assessee was consideration for the use of or the right to use any Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 26 of 28 copyright or a literary, artistic or scientific work as defined by article 12(3) of the DTAA. Granting access to the database would clearly not amount to a transfer of a right to use a copyright. We must bear in mind the clear distinction that must be recognised to exist between the transfer of a copyright and the mere grant of the right to use and take advantage of copyrighted material. Neither the subscription agreement nor the advantages accorded to a subscriber can possibly be considered in law to be a transfer of a copyright. In fact, it was the categorical assertion of the assessee that the copyright remains with it at all times.\" 31. Similarly , the Hon'ble High Court of Delhi in CIT v. Springer Nature Customer Services Centre GmbH [ITA 306/2023] adopted a similar position. Relevant paragraphs are extracted below: \"25.2 Furthermore, in our opinion, the subscription amount cannot be treated as royalty, having regard to the fact that there is nothing on record to suggest that the respondent/assessee has granted the right in respect of copyright to the concerned subscribers of the e-journals. All that the respondent/assessee did was to sell the copyrighted publication to the concerned entities, without conferring any copyright in the said material. 25.3 The Tribunal, in our view, rightly deleted the addition made under this head, given the judgment rendered by the Supreme Court in the case of Engineering Analysis.\" 32. We are of the considered view in the light of discussion above and the judicial precedents, we are inclined to agree with the assessee that Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 27 of 28 the services provided by the assessee under the subscription agreement cannot be construed as right to exploit a copyright, but merely such services provides use of 'copyrighted article'. We therefore hold that the subscription receipts do not constitute ‘royalty’ in terms of the DTAA and consequently are not taxable in India. 33. Ground No. 25 regarding Erroneous tax rate of 39.92% being applied by the Ld. AO, is not pressed. The same is therefore dismissed. 34. Ground No. 26 and 26 are consequential in nature. 35. The appeal of the assessee is partly allowed. 36. In the result, appeal of assessee in ITA Nos.1677/Del/2023 is allowed and Appeal in ITA 3056/DEL/2023 is partly allowed. Order pronounced in open court on 22.08.2025. Sd/- Sd/- [VIJAY PAL RAO] [NAVEEN CHANDRA] VICE PRESIDENT ACCOUNTANT MEMBER Dated : 22nd August, 2025. VL/ Printed from counselvise.com ITA No. 1677/DEL/2023 [A.Y 2020-21] ITA No. 3056/DEL/2023[A.Y 2021-22] Bain and Company Page 28 of 28 Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order . 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order Printed from counselvise.com "