INVESCO HOLDING COMPANY (US) INC.,USA V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE INTERNATIONAL TAXATION 2(1)(1), DELHI, DELHI

ITA 846/DEL/2025

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The case involves Inveso Holding Company (US) Inc., a tax resident of the USA, which appealed against the Assessment Order for the assessment year 2022-23. The primary issue was the addition of Rs.54,85,23,539/- to the assessee's income, treated as reimbursement for IT/Support Services under the DTAA. The Tribunal had previously ruled in favor of the assessee for similar issues in AY 2020-21 and AY 2021-22, leading to the deletion of similar additions. The Dispute Resolution Panel (DRP) had upheld the addition for AY 2022-23, pending a departmental appeal against the Tribunal's earlier decisions. The Tribunal, referencing its previous decisions and the terms of the Master Inter Company Services Agreement, ruled that the services provided did not make available any technical knowledge or skills to the Indian Associated Enterprises, and thus the reimbursements were not taxable as FTS/FIS.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785817 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Appeal Filed On: 14-02-2025
• Other Referred Cases: Bio Rad Laboratories Inc. v. ACIT, Commissioner of Income tax (International Taxation)-1 v. Bio Rad Laboratories (Singapore) Pte. Ltd., SFDC Ireland Limited v. Commissioner of Income Tax & Another, Shell India Markets Private Limited v. The Union of India & Others, Planetcast International Pte. Ltd. v. ACIT
• Laws Referred To: Income Tax Act, 1961, India-USA Double Tax Avoidance Agreement (DTAA)
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.S NETHRAPAL
• Assessee Lawyers: S ANKUL GOYAL; ADVITYA GROVER
• Keywords: Set aside; Transfer pricing; Search and seizure; Initiation of penalty proceedings; Double taxation relief
• Section: 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण िदʟी पीठ “डी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी Űजेश क ुमार िसंह, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER& SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER आअसं.846/िदʟी/2025(िन.व. 2022-23) ITA No.846/DEL/2025 (A.Y.2022-23) Inveso Holding Company (US) Inc., C/o Invesco (india) P. Ltd., 15th Floor, Block 6, North Tower, Divyasree Orion SEZ, Raidurgam, Serilingampally, Hyderabad, Telangana 5000032 PAN: AAECI-9027-N ...... अपीलाथᱮ/Appellant बनाम Vs. Assisnat Commissioner of Income-Tax, International Taxation 2(1)(1), Civic Centre, Minto Road, New Delhi 110002 .....ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by: S/Shri Ankul Goyal & Advitya Grover, Advocates ŮितवादीȪारा/Respondent by: Shri M.S Nethrapal, CIT-DR सुनवाई कᳱ ितिथ/ Date of hearing : 04/08/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : 31/10/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against Assessment Order dated 20.12.2024 passed u/s. 143(3) r.w.s 144C(13) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’), for assessment year 2022-23. 2. Shri Ankul Goyal, appearing on behalf of the assessee submits that the solitary issue in present appeal is against the addition of Rs.54,85,23,539/- in respect of reimbursement of cost for providing IT/Support Services treated as Fee Printed from counselvise.com 2 ITA No.846/DEL/2025 (A.Y.2022-23) for Including Services (FIS) under Article 12 of India-USA Double Tax Avoidance Agreement (DTAA). 3. The assessee is tax resident of USA and is engaged in providing Information Technology Application Services, IT Infrastructure Services and IT Security to its Associated Enterprises (AE’s) in India and other Invesco Group Companies located Worldwide. The ld. Counsel submits that the cost incurred by the assessee for providing IT Support Services is allocated to its AE’s on the basis of allocation rationale provided in Annexure II to the Master Inter Company Services Agreement. There is no element of profit embedded in such cost recoveries. The amount received by the assessee is purely on cost to cost. The Assessing Officer (AO) has erred in treating the cost recovered by the assessee as FTS/FIS as per DTAA and held that the same are taxable in India. The ld. Counsel submits that the Master Inter Company Services Agreement was entered into between assessee and Indian Associated Enterprises i.e. Invesco India P Ltd. on 20.05.2019 and the same agreement is valid during the impugned assessment year as well. Similar, additions were made by the AO in AY 2020-21 and AY 2021-22. The assessee carried the issue in appeal before the Tribunal in ITA No.784/Del/2023. The Tribunal vide order dated 23.07.2024 deleted the said additions. In the subsequent assessment year i.e. AY 2021-22, the assessee carried the same issue in appeal before the Tribunal in ITA No.3225/Del/2023, the Coordinate Bench following the decision rendered in AY 2020-21 deleted the additions vide order dated 02.04.2025. The factual matrix in the impugned assessment year is identical. The Dispute Resolution Panel (DRP) in para 4.4.2 of the directions has recorded the fact that the issues in the impugned assessment year are similar to the issues for AY 2020-21 and also takes note of the decision of Tribunal for said Printed from counselvise.com 3 ITA No.846/DEL/2025 (A.Y.2022-23) assessment year. The DRP upholds the additions merely for the reason that the Department is contemplating to file appeal against the order of Tribunal before the Hon’ble High Court. The ld. Counsel thus, prayers for deleting the addition made by the AO in respect of reimbursement of expenses treated it as FTS/FIS. 4. Per contra, Shri M.S Nethrapal representing the department vehemently defended the impugned order and reiterated the findings of AO. However, the ld. DR fairly accepted that the issue in instant appeal is similar to the one considered by the Tribunal in assessee’s own case in preceding assessment years i.e. AY 2020- 21 and 2021-22. 5. Both sides heard, orders of the authorities below examined. The solitary issue assailed by the assessee in present appeal is addition of Rs. 54,85,23,539/- by treating reimbursement of cost for providing IT/Support Services as FTS/FIS under Article 12 of India-US DTAA. The AE’s have reimbursed the cost for providing IT/Support Services to the assessee on the basis of Master Inter Company Services Agreement dated 20.05.2019. The reimbursements have been made on cost to cost basis, i.e. without any markup. The said agreement is placed on record at page no. 128 to 146 of the paper book. We find that identical issue was considered by the Co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.784/Del/2023 for AY 2020-21 (supra). This fact has also been acknowledge by the DRP in directions dated 26.11.2024. The Coordinate Bench while deciding this issue in AY 2020-21 examined the terms of agreement dated 20.05.2019 (supra), Article 12 of India-US DTAA and various decisions and held as under:- Printed from counselvise.com 4 ITA No.846/DEL/2025 (A.Y.2022-23) “3.1 In view of the aforesaid clause, an amount is chargeable to tax under Article 12(4)(b) of the India-USA DTAA where same is in lieu of any technical or consultancy services provided such services make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. The import of term \"make available\" has been explained in the \"Memorandum of Understanding relating to Article 12\" which forms part of the Protocol to the India- USA DTAA. In terms of the said understanding technical and consultancy services are considered included services under paragraph 4(b) if they make available technical knowledge, experience, skill, knowhow, or processes, or consist of the development and transfer of a technical plan or technical design. It further provides that technology will be considered \"made available\" when the person acquiring the service is enabled to apply the technology. It further clarifies that the fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. 3.2 Ld. Counsel has submitted that the services rendered by Assessee are routine IT management services and do not make available any technical knowledge or skills to its Indian AE(s). In this context we find that the services provided by assessee are routine and most importantly are recurring. 3.3 Now in this regard, admittedly this was a continuing contract and the services were provided year after year since 2018. We thus find substance in the contention of Ld. Counsel that in case technical knowledge was made available to the AEs then such AEs would not have required such services year after year. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year. The facts on record show that the recipient of the services is not enabled to provide the same service without recourse to the service provider. i.e, the assessee. 3.4 As for this proposition we place reliance on the decision of coordinate bench in the case of Bio Rad Laboratories Inc. v. ACIT, International Taxation - [2023] 149 Printed from counselvise.com 5 ITA No.846/DEL/2025 (A.Y.2022-23) taxmann.com 342 (Delhi - Trib.) where the bench having considered the fact that agreement was continuing over the years observed as under; “22. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the Assessing Officer/ld. CIT(A) is the incidental benefit to the assessee which has been considered to be of enduring advantage. 23. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and 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 the future without depending upon the provider.\" 3.5 The aforesaid observation further stands affirmed by the Hon'ble Jurisdictional High Court in Commissioner of Income tax (International Taxation)-1 v. Bio Rad Laboratories (Singapore) Pte. Ltd. - [2023] 155 taxmann.com 646 (Delhi) wherein it has been held as under- \"14. According to the Tribunal, the agreement between the respondent/assessee and its Indian affiliate had been effective from 1-1- 2010, and if, as contended by the appellant/revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1 Notably, this aspect is adverted to in paragraphs 17 to 23 of the impugned order. For convenience, the relevant paragraphs are extracted hereafter: …….. 15. We tend to agree with the analysis and conclusion arrived at by the Tribunal.\" Printed from counselvise.com 6 ITA No.846/DEL/2025 (A.Y.2022-23) 3.6 Thus we are of considered view the condition of make available was not satisfied for services when provided by assessee did not enabled the AEs to apply the technology independently, on conclusion of the yearly contract. 4. As with regard to the observations of tax authorities below treating the services rendered by Assessee as FIS on the basis that the Assessee was providing training to the personnel of Invesco Group and thus the 'make available condition stands satisfied in the present case the Ld. Counsel submitted that the Assessee only supports and administers IT training and same does not lead to transmission of specialized knowledge or skill. In this regard reliance is placed on the decision of the Hon'ble jurisdictional High Court in the case of SFDC Ireland Limited v. Commissioner of Income Tax & Another [Neutral Citation 2024: DHC: 1910-DB/ wherein it has been held as under- \"42. Insofar as the products for SFDC India's internal use were concerned, they stood restricted to those which would enable SFDC India to demonstrate the functionality of SFDC products in trade shows and exhibitions, to train its customers and employees on the use of those products and products to administer and manage customer accounts. None of these aspects would appear to be imbued with a technical hue. Imparting training or educating a person with respect to the functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA. More importantly, the technical assistance and training which the petitioner proposed to provide was confined to marketing. distribution, support and sale of SFDC products. The assistance and training which Section 4.3 of the Reseller Agreement speaks of was concerned with fields wholly unrelated to providing technical service. 43. Similarly Exhibit B speaks of the products being concerned with assisting the Reseller in the performance of its sales and marketing obligations. All of the above was thus aimed at merely equipping and educating the representatives of SFDC India to be in a position to comprehensively brief potential customers. The training and assistance was thus primarily aimed at the sale of SFDC products and customer related issues. This does not appear to comprise a transmission of Printed from counselvise.com 7 ITA No.846/DEL/2025 (A.Y.2022-23) specialised knowledge or skill. This more so when we bear in mind the indubitable fact that the phrase \"technical service\" is to be read in conjunction with \"managerial\" and \"consultation\" and it being the settled position in law that the principle of noscitur a sociis is to apply. 4.1 Ld. Counsel has submitted that the above observations of the Hon'ble High Court have been rendered in the context of Section 9(1)(vii) of the Act read with Article 12 of the IndiaIreland DTAA wherein the condition of make available is not contained therein. Be that as it may, the Hon'ble High Court has categorically held that provision of training does not educate a person with respect to the functionality and attributes of the product or the service and could not be classified as a technical service. 5. Ld. Counsel also distinguished the reliance by AO on the AAR ruling in the case of Shell India Markets Private Limited by submitting that same stands overturned in view of the decision of Hon'ble Bombay High Court in the case of Shell India Markets Private Limited v. The Union of India & Others [Neutral Citation-2024: BHC-AS:10000-DB). In the said case while overturning the ruling of the AAR, the Hon'ble Bombay High Court has held as under- \"18. …. …. …… A perusal of the list of services relate to managerial services not involving anything of a technical nature. The AAR has discussed the services appearing in the CCA and has concluded that these activities in a retail business are at the core of retail marketing and hence advice tendered in taking a decision of commercial nature is a consultancy service. The AAR has further considered the definition of the word 'Consultancy' as defined in the Oxford English dictionary and has observed that a consultant is a person who gives professional advice or services in a specialized field. However, the AAR failed to appreciate that the word 'Consultancy' appearing in the Article is to be interpreted in the context of consultancy which makes available technical knowledge, etc. and not of managerial nature. The reading of the Article clearly indicates that the consultancy service must be which makes available technical knowledge, etc. Sub-para (c) to Article 13(4) restricts such services to those which make available technical knowledge or consist of development and transfer of a technical Printed from counselvise.com 8 ITA No.846/DEL/2025 (A.Y.2022-23) plan or technical design. Thus, a harmonious reading of the provision of Article 13 in its entirety, clearly establishes the intent of the DTAA in making income chargeable to tax only if the services availed pertain to technical services or consultancy services. Technical services in this context mean services requiring expertise in a technology. By Consultancy Services, in this context, would mean advisory services. The categories of technical and consultancy services are to some extent, overlapping. Under paragraph 4. technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(3), If they are uncillary and subsidiary to the application or enjoyment of a right, property or information for which a payment described in paragraph (3)(4) of Article 13 received: (2) are ancillary and subsidiary to the enjoyment of the property for Chich a payment described in paragraph (3)(b) of Article 13 is received on (3) as described in paragraph above they make available technical knowledge, experience, skill know how the preces of consist of the development and transfer of a technical plan of technical design. Thus, nature paragraph 4(c), consultancy services which are not of a technical nature cannot be included services. Thus, the services availed by Petitioner cannot be said to the technical services and Article 13 is wholly inapplicable in the facts and circumstances of the present case. 26. Thus, we have no hesitation in holding that the impugned order dated 17th January 2012 of AAR suffers from legal infirmity and is quashed and set aside. 5.1 Ld. DR has however relied the orders of the authorities below. 6. In this context we find that in regard to IT administration services the assessee was providing services where the IT training and facilities training, were of desktop application tools such as Microsoft Word, excel and power point etc to staff of the group. 7. Apart from that there is nothing to show in the assessment order that the AO had made any enquiry on his own or relied any provisions of the Master Inter- Company Services Agreement (in short “MSA”) to show that the training as imparted was of such nature that it “made available”, the technology to the associate enterprises so that on conclusion of the training the employees of AE’s Printed from counselvise.com 9 ITA No.846/DEL/2025 (A.Y.2022-23) will be unable to use technology on their own. Rather we observed that very common softwares used in offices are mentioned for which the training was provided. Then Assessing Officer in para5 of the assessment order has merely relied the assessee’s own submissions to conclude that as the assessee is training personnel of the group. The provisions of make available would become applicable. Thus we are inclined to sustain the contention of the Ld. Counsel. 8. Ld. Counsel has also stressed that otherwise too, the fee received by the Assessee is in the nature of reimbursement as it is simply allocation of costs without any mark-up and thus same not be treated as income of the Assessee. In this regard reliance is placed on the decision of the Hon'ble High Court of Delhi in the case of Planetcast International Pte. Ltd. v. ACIT-(2023) 152 taxmann.com 422 (Delhi Trib.) wherein it has been held as under:- \"59. We have considered rival submissions and perused the materials on record. From the assessment order, it is discernible that the receipts are in the nature of cost-tocost reimbursement of payments made to Singapore government. Hence, the receipts did not have any profit element embedded therein. In fact, the Assessing Officer has not disputed the aforesaid factual position. In case of DIT (International Taxation) v. A.P. Moller Maersk AS [2017] 78 taxmann.com 287/246 Taxman 309/392 ITR 186/[2017] 5 SCC 651. the Hon'ble Supreme Court has observed that once the character of the payment is found to be in the nature of reimbursement of expenses without having any profit element embedded therein, it cannot be held to be chargeable to tax. 9. It comes up that the AO has not made any enquiry to rebut the claim of the assessee that the cost incurred by the assessee company for providing IT support services is allocated to its AE’s without any element of profit. In this context as we consider the copy of a MSA dated 20.05.2019 as made available on pages 131 to 149 of the paper book alongwith the copies of debit note made available on pages-150 to 153 of the paper book. We find that it was agreed that remuneration for the services has been calculated with the objective of determining an arms length price for the services provided by using methodology as set forth under ‘service fee clause”. The annexure-1 provided that service fee Printed from counselvise.com 10 ITA No.846/DEL/2025 (A.Y.2022-23) shall be determined and allocated to the parties based on allocation keys for which in the appendix, annexure-2 provided as under :- “Annex II to the Master Intercompany Service Agreement made on 20 MAY, 2019 between Invesco (India) Private Limited (\"the Recipient\") and Invesco Holding Company (US) Inc. (\"the Provider\") Services Provided Commencing on 01 April 2018, the Provider will provide IT support services to the Recipient in respect of IT Application Service Functions, IT Infrastructure Service Functions and IT Security & Administration Service Functions. Details of the services are included in the table below. For the avoidance of doubt, the table below provides a non-exhaustive description of the types of services to be provided for the benefit of the Recipient. Not all services may be provided to the recipient and charges are only made for the actual services provided. Allocation key As these costs are not directly attributable to a particular beneficiary, they are allocated out according to each cost center's allocation methodology. The methodologies chosen, for example, could be based on full time equivalents by location, number of users, actual costs, number of desktops, historical time, management estimate, user traffic, headcount or a blend of several. Each cost center determines the most applicable and logical allocation methodology based on the functions of the employees in the cost center or the function of the cost center itself. The rationale for this is that the recipient is only being recharged in proportion to the usage and benefits of the services provided.” 10. In the light of aforesaid were inclined to hold that the tax authorities below have fallen in error in not appreciating that the reimbursement was on cost to cost basis. Accordingly we sustain this argument of the Ld. Counsel also. 11. In the light of aforesaid the grounds raised are sustained and the appeals of the assessee are allowed.” Printed from counselvise.com 11 ITA No.846/DEL/2025 (A.Y.2022-23) 6. In subsequent assessment year as well i.e. AY 2021-22, the Tribunal in ITA No.3225/Del/2023(supra) followed earlier decision of the Tribunal and deleted the addition. 7. No contrary material has been placed before us by the Revenue to controvert earlier finding of the Tribunal, hence, we see no reason to deviate from the earlier decision of the Coordinate Bench. The addition of Rs.54,85,23,539/- is thus directed to be deleted for parity of reaons. The assessee succeeds on ground no. 1 to 6 of appeal. 8. The assessee in ground no. 7 of appeal has assailed initiation of penalty proceedings u/s. 274 r.w.s. 270A of the Act. Challenge to penalty proceedings at this stage is premature, hence, ground no. 7 of appeal is dismissed. 9. In the result, appeal of the assessee is partly allowed in the terms aforesaid. Order pronounced in the open court on Friday the 31st day of October, 2025. Sd/- Sd/- (BRAJESH KUMAR SINGH) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 31/10/2025 NV/- Printed from counselvise.com 12 ITA No.846/DEL/2025 (A.Y.2022-23) ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, DELHI Printed from counselvise.com "