HIRERIGHT LLC,UNITED STATES OF AMERICA V. ASSISTANT COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, GURGAON, GURUGRAM

SA 19/DEL/2025

AI Insights

The case involves two companies, HireRight Limited and HireRight LLC, which are part of the same group and provide background screening and investigation services in India. The tax authorities treated the income from these services as royalty, leading to a significant tax demand for the assessment year 2022-23. The companies appealed against this decision, citing previous rulings in their favor for earlier assessment years, where similar services were not classified as royalty under the India-USA Double Taxation Avoidance Agreement (DTAA). The Tribunal, considering the precedents and the dismissal of the Revenue's appeal by the Hon'ble High Court, decided in favor of the applicants, granting a stay on the tax demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41739 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: ITA No.3413/Del/2023, ITA No.1995/Del/2024, ITA No.1884/Del/2022, ITA No.373/Del/2013
• Laws Referred To: India-USA Double Taxation Avoidance Agreement (DTAA)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: KISHORE KUNAL; ASHMITA SHARMA
• Keywords: Application of stay

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D: NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER Stay Application No.18/Del/2025 (ITAs No.187/Del/2025) Assessment Year: 2022-23 HireRight Limited, 15, Westferry Circus, Canary Wharf, London, Foreign, United Kingdom. PAN: AAECH0080Q Vs ACIT, Circle, International Tax 2(1)(1), New Delhi. Stay Applications No.19/Del/2025 (ITAs No.185/Del/2025) Assessment Year: 2022-23 HireRight LLC, 100, Center View Suite 300, Nashville, United States of America. PAN: AADCH2254D Vs. ACIT, International Tax, Gurgaon. (Applicant) (Respondent) Assessee by : Shri Kishore Kunal, Advocate & Ms Ashmita Sharma, Advocate Revenue by : Shri Sahil Kumar Bansal, Sr. DR Date of Hearing : 24.01.2025 Date of Pronouncement : 31.01.2025 ORDER ITAs No.18 & 19/Del/2025 2 PER ANUBHAV SHARMA, JM: Heard and perused the record. 2. The applications have been filed by the two different assessee, who are part of same group, for stay of their demands, for the assessment year 2022-23. 3. The appellants are companies incorporated under the laws of United Kingdom and United States of America and are tax resident of UK and USA, respectively, for the purpose of Article 4 of the India-USA Double Taxation Avoidance Agreement (DTAA) and are in the business of providing background screening and investigation services to its customers in India. The ld. AR has pointed out that the following additions have been made in the assessment year 2022-23:- HireRight Limited S.No. Particulars Amounts (INR) 1. Treating background screening and investigation services as Royalty 14,60,96,008 Total 14,60,96,008 HireRight LLC S.No. Particulars Amounts (INR) 1. Treating background screening and investigation services as Royalty 23,69,97,289 2. Treating reimbursement of common internet and IT related costs as Royalty 27,31,030 Total 23,97,28,319 ITAs No.18 & 19/Del/2025 3 4. The ld. AR has submitted that the issue with regard to treating background screening and investigation services as Royalty is now decided in favour of the both assessee in own cases for AY 2020-21 vide order dated 19th January, 2024 in ITA No.3413/Del/2023 and for AY 2018-19 vide order dated 14th November, 2024 in ITA No.1995/Del/2024. The ld. AR has also relied an order in appellant’s group company’s case for AY 2019-20 and 2020-21 in ITA No.1884/Del/2022 and in ITA No.373/Del/2013 wherein it has been held that the revenue received by the said assessee of applicant’s group from provision of background screening and investigation services is not in the nature of royalty or FTS under the India-UK DTAA. 5. It was pointed out that the Hon’ble High Court has dismissed the appeal of the Revenue. 6. As, with regard to the addition of Rs.27,31,030/- in AY 2022-23 in case of applicant HireRight LLC on account of treating reimbursements of common internet and IT related cost as royalty, the ld. AR has submitted that this forms very small portion and otherwise at this stage the assessee is not pressing much upon it. 7. The ld. DR could not dispute the facts of orders of the coordinate Bench and of the Hon’ble High Court. However, still the request was made by the ld. DR for deposit of at least 20% of the disputed demands for both the applicants. 6. We are of the considered view that once the issue is squarely covered in favour of the assessee, then, the assessee has a strong prima facie case and all the probabilities for succeeding in the respective appeals. The strong prima facie case ITAs No.18 & 19/Del/2025 4 is, thus, followed by balance of convenience and financial hardships in favour of assessee alone. Thus, no case is made out for a direction to deposit at least 20% of the disputed tax demand in regard to the issue of liability created on the basis of impugned addition on account of royalty arising out of background screening and investigation services. 7. Consequently, the applications in hand are allowed. There shall be a stay of demand in regard to both the assessee before us with regard to the demand created by the ld. tax authorities below on the basis of treating background screening and investigation services receipts as royalty, for a period of 180 days or disposal of respective appeals, whichever is earlier. 8. In terms of the above, both the Stay Applications are allowed. Order pronounced in the open court on 31.01.2025. Sd/- Sd/- (SHAMIM YAHYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31st January, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "