EDENRED SE (FORMERLY KNOWN AS EDENRED SA, MUMBAI V. DY. COMM OF INCOME TAX INTERNATIONAL TAXATION-2(2), MUMBAI

ITA 1563/MUM/2022

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Edenred SE, a French company, appealed against the assessment order for A.Y. 2019-20, which included income from services provided to its Indian subsidiaries. The main contention was whether the income from TSIS Service Fees, Management Service Fees, and Guarantee Fees were taxable in India. The Tribunal found that TSIS Service Fees and Management Service Fees should not be treated as royalty or fees for technical services, referencing previous decisions in the assessee's own case. However, the issue of Guarantee Fees was remitted back for re-evaluation, as the assessee had not filed a revised return but claimed the fees were not taxable under the India-France DTAA.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 108407 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I
• Next Hearing Date: 30-07-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 14-06-2022
• Other Referred Cases: Goetze India Ltd vs CIT, Bharati Axa General Insurance Co. Ltd. vs CIT, Standard Chartered Bank vs DDIT, ExxonMobil Company India (P) Ltd. vs CIT, M/s Reliance Jio Infocomm Ltd. vs CIT, GR1 Renewable Industries S.L. vs CIT, CIT vs Pruthvi Brokers & Shareholders (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RELYING UPON ITS DECISION
• Keywords: Double taxation relief
• Section: 2; 143(3); 13

Judgement Text

1 ITA 1563/Mum/2022 Edenred SE IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “I”, MUMBAI BEFORE SHRI VIKAS AWASTHI (JUDICIAL MEMBER) AND MS. PADMAVATHY S. (ACCOUNTANT MEMBER) I.T.A. No.1563/Mum/2022 (Assessment year 2019-20) Edenred SE (Formerly known as Edenred SA), C/o Walker Chandiok & Co LLP, 11 th Floor, Tower II, One International Centre, S B Marg, Prabhadevi (W), Mumbai-400 013 PAN : AACCE9031G vs Deputy Commissioner of Income-tax, International Taxation-2(2)(1), Room No.1722, 17 th Floor, Air India Building, Nariman Point, Mumbai- 400 021 APPELLANT RESPONDENT Assessee represented by Shri Jitendra Singh Department represented by Shri.Anil Sant, Sr. DR Date of hearing 31-07-2023 Date of pronouncement 04-08-2023 O R D E R PER : MS PADMAVATHY S. (AM) This appeal is against the final order of assessment by the Deputy Commissioner of Income-tax, International Taxation, Circle 2(2)(1), Mumbai dated 29/04/2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short, „the Act‟) for A.Y. 2019-20. 2. The assessee, is a company formed and incorporated in France and belongs to Edenred group of companies which operate worldwide. Edenred Group which 2 ITA 1563/Mum/2022 Edenred SE invented ticket restaurant, meal voucher, is a world leader in prepaid corporate services, designs and delivers solutions that make employees life easier and improve the efficiency of the organisation. Edenred operates in 40 countries with around 6,000 employees, nearly 610,000 companies and public sector clients, 1.3 million affiliated merchants and 38 beneficiaries. The assessee is offering range of services from pure consulting to all aspects of communication development and implementation including sourcing of loyalty rewards. The assessee is also engaged in providing agreed services to its group companies, viz. Edenred (India) Private Limited, Royal Image Direct Marketing Private Limited and SurfGold.com (India) Private Ltd. The assessee filed the return of income for A.Y. 2019-20 on 29/11/2019 declaring total income of Rs.1,67,80,082/-. The case was selected for scrutiny under CASS and the statutory notices are duly served on the assessee. During the year under consideration, the assessee has received a sum of Rs. 7,76,57,184/- towards the services rendered to the Indian companies and the break- up of the amount received is as below:- 1. Licence Fee Rs. 1,25,72,805/- 2. Guarantee Fees Rs. 42,07,277/- 3. Management service fees Rs. 5,54,53,990/- 4. Technology and strategic information System fees(TSIS fees) Rs. 54,13,100/- 3. The assessee while filing the return of income offered the income from license fee and guarantee fee. With regard to the management service fees and TSIS services fees, the assessee did not offer the same to tax for the reason that the same is not liable to be taxed as per Article 13 read with the protocol of the India - France DTAA alongwith Article 12 of India Finland DTAA / India USA DTAA. The Assessing Officer taxed the management fees and TSIS services fees as royalty / fee for technical service (FTS) and levied tax at 10% under the beneficial 3 ITA 1563/Mum/2022 Edenred SE rate as per the DTAA. Before the DRP, the assessee made a claim that the guarantee fee is also not liable to be taxed in India. The DRP confirmed the addition made towards management fees and TSIS services by relying on its own order for A.Y. 2015-16. With regard to the fresh claim made by the assessee towards guarantee fee, the DRP did not admit the claim of the assessee by relying on the decision of Goetze India Ltd vs CIT 284 ITR 323 (SC). The assessee is in appeal before the Tribunal against the final order of assessment passed by the Assessing Officer pursuant to the directions of the DRP by raising the following grounds:- “1. General Ground The Assessing Officer („AO‟) has erred in assessing the total income at INR 7,76,57,184/- as against INR 1,25,805/- as per the revised claim by the appellant during the course of assessment proceedings. 2. TSIS Service Fees taxed as Royalty The AO has erred in considering TSIS Service Fees of INR 54,13,112/- to be taxable as Royalty under the India-France Double Taxation Avoidance Agreement („DTAA‟). 3. Management Service Fees taxed as Fees or Technical Services („FTS‟) The AO has erred in considering Management Service Fees of INR 5,54,63,990/- taxable as FTS under the Act as well as under the India-France DTAA read with Para 7 of the protocol of the India-France DTAA containing the Most Favoured Nation Clause and Article 12(5) of the India-Finland DTAA, which provides that the services shall be taxable at the place where the services are performed. 4. Management Service Fees taxed as Fees for Technical Sevices („FTS‟) 4 ITA 1563/Mum/2022 Edenred SE The AO has erred in considering Management Service Fees of INR 5,54,63,990/- taxable as FTS under the provisions of the Act as well as under the India – France DTAA containing the Most Favoured Nation Clause and as per the India – USA DTAA, which provides that only services which makes available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design are taxable as FTS / fees for included services. 5. Guarantee Fees i. The AO has erred in not considering the claim made during the assessment proceedings that guarantee fees are not subject to tax in India. ii. The AO has erred in considering Guarantee Fees as taxable in India. The Guarantee Fees of INR 42,07,277/- are in the nature of “Business Income” and since the appellant does not have a Permanent Establishment in India, the same would not be taxable in India as per Article 7 of the India- France DTAA.” TSIS Services taxed as Royalty – Ground No.2 4. The assessee provides TSIS services to its Indian group companies. These services include, I.T. Infrastructure management and mailbox and website posting services. During the year under consideration, the assessee has earned an income of Rs.54,13,112/- as payment towards rendering of TSIS services from its 3 group companies viz. Edenred (India) Pvt Ltd, Royal Image Direct Marketing Private Limited and SurfGold.com (India) Private Ltd. The assessee entered into agreements with all the 3 companies wherein the scope of work and modality to provide TSIS services to its Indian group companies are mentioned identically for all three companies. The TSIS services broadly include posting services, support 5 ITA 1563/Mum/2022 Edenred SE and maintenance services, development services, infrastructure and security services and professional services. The Assessing Officer issued a notice asking the assessee as to why the payment should not be taxed in India as royalty. The assessee filed a detailed reply stating that the services rendered does not involve any use of or the right to use any patent, trademark, design or model, plan, secret formula or process. The assessee submitted that the services rendered are strictly restricted to what is described in the TSIS agreement. The assessee further submitted that TSIS services are provided only to support the Indian group companies in carrying on business efficiently and running the business in line with the business model, policies and best practices followed by the Edenred group. The Assessing Officer held that the assessee and the Indian group companies are involved in same business, i.e. manage prepaid CHM / PRM rewards, royalty and marketing solutions for corporate houses and that the assessee, in order to provide services to the Indian group companies allows the Indian companies and its approved customers to have access to and use the central processing unit (CPU) at France against the payments. The Assessing Officer was of the view that since the data inputs stored in the CPU of the assessee , which are confidential secret relating to the business transactions of the concerned parties, the retrieval of such data/ information by Indian companies and its approved clients makes available to it confidential or secret information concerning commercial matters. Accordingly the Assessing Officer held that the payments made by Indian companies for obtaining such data/information are in the nature of royalty income. 5. The DRP confirmed the addition by relying on its own decision for the assessment year 2015-16. 6 ITA 1563/Mum/2022 Edenred SE 6. The Ld.AR submitted that the assessee has been rendering such services to its Indian group companies from inception. The Ld.AR also submitted that these services are rendered from France and the assessee has entered into an agreement in this regard with its Indian group companies. The Ld.AR further submitted that the DRP has relied on its own order for A.Y. 2015-16 while upholding the treatment of TSIS services as royalty and that the co-ordinate bench of the Tribunal has held the issue in favour of the assessee for the said assessment year vide order dated 23/12/2012. The Ld.AR brought to our attention that the issue is recurring in nature and the Tribunal in assessee‟s own case has been consistently holding that TSIS services are not to be treated as royalty and therefore should not be taxed in India. The Ld.AR submitted that the issue for the year under consideration is covered by the decision of the co-ordinate bench since there is no change to the facts pertaining to the issue. 7. The Ld.DR relied on the assessment order and the directions of the DRP. 8. We heard the parties and perused the material on record. We notice that the co-ordinate bench in assessee‟s own case has been consistently holding that the payment received by the assessee towards TSIS services is not taxable in India. The coordinate bench in the consolidated order passed for A.Y. 2012-13 to 2015- 16 order dated 23/12/2022 has considered the same issue and held that:- “8. We have heard the rival submissions and perused the material available on record. In the present case, vide draft assessment order, the AO held that TSIS Service Fee received by the assessee is taxable as royalty, while the Management Service Fee is taxable as fees for technical services. In further proceedings, the learned DRP came to the conclusion that services provided by the assessee are similar to the services provided by the group company of the assessee i.e. Edenred PTE Ltd. Accordingly, the learned DRP following 7 ITA 1563/Mum/2022 Edenred SE its directions rendered in the case of group concern for the assessment years 2011–12 and 2012–13 directed that the consideration received by the assessee under both TSIS and Management Service Agreements are taxable in India. The learned DRP further directed that fees received by the assessee under the aforesaid agreements be taxed as royalty. It cannot be disputed that the learned DRP‟s direction was issued on 24/11/2015, and thus was appealable by the Revenue before the Tribunal. Since, the Revenue has not challenged the aforesaid findings of the learned DRP and has accepted the same, therefore now in the present appeal we need to only examine whether the receipts under the aforesaid agreements are in the nature of royalty. On which issue, the assessee is in appeal before us. 8. Under the TSIS Agreement, the services provided by the assessee include IT infrastructure management and mailbox and web hosting services. During the year, the assessee received total consideration of Rs. 42,42,933, from its 3 group companies, namely, Edenred (India) Private Ltd, Royal Images Direct Marketing Private Limited, and SurfGold.com (India) Private Ltd. There is no dispute regarding the fact that under the agreement with each of the aforesaid entities the nature of services provided by the assessee is identical. Further, under the aforesaid agreement, services are broadly defined as any and all hosting services, support and maintenance services, development services, infrastructure and security services, and professional services proposed by the assessee to the Indian group companies. Vide draft assessment order, the AO held that the assessee and its Indian group companies are in the same business of managing prepaid CHM/CRM, rewards, loyalty, and marketing solution for corporate houses. Further, the services offered by Indian group companies need a sophisticated computer program that can monitor, track and maintain such transactions and loyalty/rewards points. The AO further observed that for this purpose the assessee is required to maintain the customer‟s individual profile where the personal information, as well as their transaction track, can be kept in the assessee's information processing Centre in France. The assessee owns and maintains the said processing Centre which requires a huge high-tech computer complex having multiple mainframe computers and other related hardware and software facilities involving substantial investment and capable of very high volume storage and high processing of data. The AO also observed that the assessee allows Indian companies and their approved customers to have access to and use its Central Processing Unit („CPU„) in France against payment. Further, the assessee allows the use of its mainframe situated in France and also incidental electronic mail excess, consolidated data network expenses, and consolidated data network services to Indian group entities on a payment basis. The AO further held that the Indian company‟s access to mainframe 8 ITA 1563/Mum/2022 Edenred SE computers through electronic connectivity on the basis of a contract for use establishes a business connection of the assessee with the Indian company in India. Accordingly, the AO came to the conclusion that income is taxable under the head royalty under section 9(1)(vi) of the Act. The AO also held that the income is also taxable as royalty under the provisions of India France DTAA. Accordingly, the AO added the income to the total income of the assessee as royalty taxable at 10% under the beneficial rate as per the DTAA. 9. We find that the taxability of income arising from similar services rendered by the assessee‟s group concern, namely, Edenred PTE Ltd came up for consideration before the coordinate bench of the Tribunal in Edenred PTE Ltd vs DCIT, in ITA No.2178/Mum./2017, for the assessment year 2013-14. The coordinate bench of the Tribunal after considering the facts of the case in para 6 of its order, decided the similar issue in favour of the assessee‟s group concern and held that income arising from the provision of services by the assessee cannot be treated as royalty either under the provisions of the Act or under the India Singapore DTAA. The relevant findings of the coordinate bench of the Tribunal are as under: ― 7. As could be seen from the facts discussed herein before, the issue in dispute is, whether the payment received by the assessee from provision of IDC services can be treated as royalty under Article 12 of India-Singapore DTAA. As we find, identical issue came up for consideration before the Tribunal in assessee's own case for assessment years 2010-11 to 2012-13. In fact, learned DRP has decided the issue in favour of the revenue by relying upon its decision in assessee's own case in assessment year 2012-13. However, while deciding the appeals of the assessee on identical issue in assessment years 2010-11 to 2012-13 the Tribunal, in the order referred to earlier in the order, has held that the payment received by the assessee from provision of IDC services is not in the nature of royalty. The observations of the Tribunal in this regard are as under: "6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. We find that (i) under the said IDC agreement, the appellant, essentially provides IT infrastructure management and mail box/website hosting services to its India group companies; these IDC services are performed by the appellant's personnel in Singapore; the Indian group companies directly 9 ITA 1563/Mum/2022 Edenred SE remit IDC service payments towards the appellant's bank account in Singapore, (ii) IDC is an ISO 27001 certified data centre owned by Edenred Pte. and located in Singapore; IDC services are provided using the IDC and IT/ security team in Singapore, (iii) the services under the IDC agreement comprise of administration and supervision of central infrastructure; mailbox hosting services and website hosting services, (iv) IDC services ensure 100% uptime for critical external facing applications which need highly secured web environment and dedicated team of security experts to ensure 100% uptime of security systems (firewall, antivirus, access controls) which are also hosted on server in Singapore. We further observe that examples websites/applications/softwares hosted by Indian of group companies on the data centre in Singapore are web ordering application, corporate website, websites created for customers of Edenred India entities while making a loyalty program for them. A perusal of the documents filed before the AO and DRP clearly indicate that (i) appellant has an infrastructure data centre, not information centre at Singapore, (ii) the Indian group companies neither access nor use CPU of the appellant, (iii) no CDN system is provided under the IDC agreement, no such use/access is allowed, (iv) the appellant does not maintain any such central data (u) IDC is not capable of information analytics, data management, (vi) appellant only provides IDC service by using its hardware/security devices/personnel; all that the Indian group companies received are standard IDC services and not use of any software, (vii) bandwith and networking infrastructure is used by the appellant to render IDC services; Indian companies only get the output of usages of such bandwith and network and not its use, (viii) consideration is for IDC services and not any specific program and (ix) no embedded/secret software is developed by the appellant. Against the above factual backdrop, let us discuss below the case laws relied on both sides. 6.1 We begin with the case laws relied on by the Ld. counsel. A plethora of precedents on the subject in which we are presently concemed compels us, in order to avoid prolixity, to refer only a few decisions below. 10 ITA 1563/Mum/2022 Edenred SE In the case of Bharati Axa General Insurance Co. Ltd. (supra), the appellant, an Indian company carrying on business of general insurance entered into a service agreement with a Singapore company AXA ARC for receiving assistance such as business support, market information, technology support services and strategy support etc. from the latter. The AAR held that (i) though the services rendered by AXA ARC may well be brought within the scope of the definition of FTS under the IT Act as they answer the description of consultancy services or some of them may be categorized as technical services but the qualifying words "make available technical knowledge, experience, skill, know-how, which enables the recipient of services to apply the technology contained therein" in Article 12.4 of the DTAA make material difference, (ii) all technical or consultancy services cannot be brought within the scope of this definition unless they make available technical knowledge, knowhow etc which in turn facilitates the person acquiring the services to apply the technology embedded therein, (iii) services provided by AXA ARC to the applicant do not fulfill the requirements of the definition of FTS in the DTAA, (iv) even assuming that they are technical or consultancy services, it cannot be said that the applicant receiving the services is enabled to apply the technology contained therein, (v) also there is nothing in the IT support services that answers the description of technical services as defined in the DTAA, (vi) therefore, the fees paid to AXA ARC by the applicant does not amount to fees for technical services within the meaning of the DTAA, (vii) as regards the payments made for providing access to software applications and to the server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the service agreement, same cannot be brought within the scope of the definition of 'royalty' in Article 12.3, (vii) there is no transfer of any copyright in the computer software provided by AXA ARC and it cannot be said that the applicant has been conferred any right of usages of the equipment located abroad, more so, when the server is not dedicated to the applicant. Similarly, in the case of Standard Chartered Bank (supra), the assessee bank entered into an agreement with a Singapore company SPL, for the provision of data processing support for its business in India and that data processing is down outside India. Application software by which 11 ITA 1563/Mum/2022 Edenred SE data is transmitted to hardware at Singapore and processed by SPL at Singapore is owned by the assessee. Thus what is used by the appellant is the computer hardware owned by SPL. The Tribunal held that (i) payment in question can be said to be a payment for a facility which is available to any person willing to use the facility, (ii) system software which is embedded in the computer hardware by which the computer hardware functions is not owned by SPL and SPL only has a license to use the system software; (iii) consideration received by SPL is for using the computer hardware which does not involve use or right to use a process, (iv) there is nothing on record to establish that the hardware could be accessed and put to use by the assessee by means of positive acts, (v) therefore, it cannot be said that the payment by the assessee to SPL is royalty within the meaning of Article 12 of the treaty. In ExxonMobil Company India (P) Ltd. (supra), the assessee had paid certain amount to 'EMCAP', Singapore towards global support fees. The AO opined that payment made by the assessee was in the nature of FTS as defined in Explanation 2 to section 9(1)(vii) of the Act. The Tribunal observed that as per terms of agreement, EMCAP had to provide management consulting, functional advice, administrative, technical, professional and other supporting services to the assessee; however, there was nothing in agreement to conclude that in course of such provision of service, EMCAP had made available any technical knowledge, experience, skill, knowhow or process which enabled assessee to apply technology contained therein on its own. Therefore, the Tribunal held that payment made by the assessee could not be considered as FTS as defined under Article 12(4)(b) of the India-Singapore DTAA. In M/s Reliance Jio Infocomm Ltd. (supra) for AY 2016-17, the Tribunal observes that though the India-Singapore Tax Treaty is amended by Notification No. SO 935(E) dated 23.03.2017, however, the definition of 'royalty' therein has not been tinkered with and remains as such. 6.2 Now we turn to the case laws relied on by the Ld. DR. In the case of Cargo Community Network (P.) Ltd. (supra), the assessee, a non-resident company has its registered office at Singapore. It is engaged in the business of providing access to 12 ITA 1563/Mum/2022 Edenred SE an internet based air cargo portal known as Ezycargo at Singapore. The applicant received payments from an Indian subscribers for providing password to access and use the portal hosted from Singapore. The AAR held that payments made for concurrent access to utilize the sophisticated services offered by the portal would be covered by the expression royalty. We find that subsequently, after considering the decision in Cargo Community Network (P.) Ltd. (supra), Mumbai ITAT in the case of Standard Chartered Bank 11 ITR 721 and Yahoo India Pvt. 140 TTJ 195 held that no part of the payment could be said to be for use of specialized software on which data is processed as no right or privilege was granted to the company to independently use the computer. In the case IMT Labs (India) (P) Ltd. (supra), the assessee, an Indian company, entered into an agreement with a non-resident American company for securing license of a particular software, which the applicant is entitled to use. The applicant has to pay license fee for usage of software to the American company. The AAR held that 'Smarterchild' application software on the American company's server platform is scientific equipment licensed to be used for commercial purposes and therefore, payments made for producing and hosting Interactive Agent' applications would be covered by the expression 'royalties' as used in Article 12. However, we find that in the instant case, appellant only provides service by using its hardware/security devices/personnel and not use of any software and therefore the above case is distinguishable from the present appeal. In ThoughtBuzz (P) Ltd. (supra), the applicant, a Singapore company was engaged in providing social media monitoring service for a company, brand or product. It was a platform for users to hear and engage with their customers, brand ambassadors etc. across the internet. The applicant offered service on charging a subscription. The clients, who subscribe, can login to its website to do a search on what is being spoken about various brands and so on. The AAR held that the amount received from offering the particular subscription based service is taxable in India as 'royalty' in terms of paragraph 2 of Article 12 of the DTAC between India & Singapore. However, we find that in the intense, the appellant in only providing DC service which includes administration and supervision of central infrastructure, mailbox hosting services and 13 ITA 1563/Mum/2022 Edenred SE website hosting services and therefore, the ratio laid down in the above is not applicable to the facts of the appellant's case. 6.3 From the enunciation of law in Bharati Ax General Insurance Co Ltd. ExxonMobil Company India (P) Ltd., Standard Chartered Bank v. DDIT; DCIT v/s M/s Reliance Jio Infocomm Ltd. narrated at pare 6.1 hereinbefore, it is quite luculent that revenues under the IDC agreement ought not to be taxed in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA. Therefore, we delete the addition of Rs.95,62,479/- made by the AO towards IDC charges and allow the 2nd ground of appeal. 8. Facts being identical, respectfully following the decision of the coordinate Bench in assessee's own case as referred to above, we hold that the amount received by the assessee from provision of IDC services cannot be treated as royalty either under the provisions of the Act or under India-Singapore DTAA, hence, cannot be taxed at the hands of the assesse. Accordingly, addition of Rs. 1,86,50,124/- deleted. This ground is allowed.” 10. In the present case, from the nature of services provided by the assessee, it is evident that the services are performed by the assessee‟s own personnel in France and the payment on account of search services was directly remitted by the Indian group companies to the assessee. As part of the TSIS Service Agreement, the Indian group companies only receive standard services and no licences in any software/right to use any software etc. is provided. Further, there is no sharing of any confidential information by the assessee with the Indian group companies. The term „Royalty‟ is not as widely defined in India France DTAA as in the India Singapore DTAA, which was taken into consideration by the coordinate bench of the Tribunal in the case of sister concern. Since it has not been disputed that the facts of the present case are similar to the case of the assessee‟s group concern, wherein income arising from services of similar nature are held to be not taxable as royalty, therefore, we find merit in the plea of the assessee. Accordingly, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we direct the AO to delete the addition in respect of TSIS Service Fees received by the assessee. As a result, ground No. 2 raised in assessee‟s appeal is allowed.” 9. It is noticed that the assessee has entered into an agreement with the Indian companies for rendering TSIS services dated 30/11/2017 and the terms of the 14 ITA 1563/Mum/2022 Edenred SE agreement as per the submission of the ld AR are verbatim similar to the agreement which were in force for A.Ys. 2012-13 to 2015-16. It is also noticed that the DRP while upholding the treatment of TSIS fees as royalty, while following its own order for A.Y. 2015-16 did not bring out any contrary finding with regarding the nature of services rendered by the assessee or the terms as per the terms of agreement dated 30/11/2017. Therefore, in our considered view, the decision of the co-ordinate bench in assessee‟s own case for A.Ys. 2012-13 to 2015-16 is applicable to the year under consideration also. Therefore, respectfully following the above decision of the co-ordinate bench, we direct the Assessing Officer to delete the addition made towards TSIS services by treating the same as royalty. Management Fees taxed as fees for technical services (FTS) – Ground Nos. 3 and 4 10. During the year under consideration, the assessee earned a sum of R.5,54,63,990 from its Indian group companies towards management fees and claimed that the same is not taxable in India as per Article 13 read with India – France DTAA alongwith Article 12 of India Finland DTAA / India USA DTAA. The assessee has entered into management agreement with its Indian group companies in order to provide the management services in connection with the business and operations of the said companies. The service broadly include, consultancy services to support sales activities, technical services, technical control, legal and financial advisory assistance, computer services, human resources, communication, etc. The Assessing Officer held the management service fees received by the assessee to be „fee for technical services‟ for the reason that the services are used in India and taxable as FTS under section 9(1)(vii) 15 ITA 1563/Mum/2022 Edenred SE of the Act. The Assessee raised its objections before the DRP stating that the assessee is a tax resident of France and accordingly eligible to on the provisions of the India-France DTAA if the same is more beneficial. The assessee further submitted that the nature of services rendered by the assessee does not involve "make available" of any technical knowledge to the Indian companies and that the said companies continue to avail the services from the assessee on regular basis. The assessee also submitted that since the make available clause is not satisfied in this case as elaborated in the memorandum to India US Treaty such services cannot be taken as FTS either as per India Finland Treaty or India US Treaty as per most favoured nation (MFN) clause. Thus the assessee submitted that the amount is not taxable in India. However the DRP upheld the addition made by relying on its own decision for A.Y. 2015-16. 11. The Ld.AR submitted that the issue is covered by the decision of the co- ordinate bench in assessee‟s own case for AYs 2017-18 and 2018-19 (ITA No.1049/Mum/2021 & ITA No.369/Mum/2022 dated 28.02.2023) in which the similar issue is held by the Tribunal in favour of the assessee. The Ld.AR submitted that this is a recurring issue and the Tribunal has been consistently holding that the management services fees received by the assessee is not in the nature of royalty. 12. We heard the parties and perused the material on record. We notice that the co-ordinate bench in assessee‟s own case for AYs 2017-18 and 2018-19 (supra) considered similar issue and held that – 14. We have heard both the sides and perused the materials on record. With the assistance of Ld. representatives, we have perused' the decision of ITAT in assessee's own case for A.Y. 2012-13 vide IT A 16 ITA 1563/Mum/2022 Edenred SE No.508/Mum/2016 & 7247/Mum/2017 dated 23/12/2022 wherein similar issue, following the judicial pronouncements earlier decided in assessee's own case was followed: "12. During the year, the assesses earned Management Service Fees amounting to ' Ps. 7,19,02,857, from its aforesaid Indian group companies under the Management Service Agreement. Under the agreement, the services provided by the assessee broadly include management services in the nature of external communication services, strategy and development services, finance services, legal services, general management, and coordination services, and zone management services. There is no dispute regarding the fact that under the agreement entered into with each of the aforesaid entities the nature of services provided by the assessee is identical. As noted above, the AO vide draft assessment order treated the Management Services Fees as fees for technical services under section 9(l)(vii) of the Act and Article 13 of India France DTAA. However, in further proceedings, the learned DRP has held the fees received by the assessee under the Management Services Agreement to be taxable as royalty. As noted above, the Revenue has not filed any appeal against the appealable DRP's directions and therefore has accepted the findings of the learned DRP. From the perusal of the Management Services Agreement entered into by the assessee with the aforesaid Indian group companies, forming part of the paper book from page no. 280 - 324, we find that the scope of work is restricted to various services in the nature of public relations services, corporate social responsibility, partnership opportunities, networking coordination, financial services, legal services / advices, human resources. In support, the assessee has also filed copies of emails exchanged between the parties regarding the aforesaid services. As per the assessee, the services are provided only to support the Indian group companies in carrying on business efficiently and running the business in line with the business model, policies, and best practices followed by the Edenred group. From the perusal of documents available on record, it is evident that the services are general management services rendered by the assessee to its Indian group companies on a recurring basis and there is no use or right to use any copyright, patent, trademark, design, etc. Further, there is no sharing of any confidential information by the assessee with the Indian group companies. Though the assessee is a resident of France and therefore, is entitled to provisions of the India France DTAA, however, even under the provisions of the Act the fees received by the assessee for rendering the aforesaid services do not constitute royalty. As the impugned ment services rendered by the assessee are to be examined only on the tone of royalty in the present appeal, therefore, we are of the considered that Management Service Fee received by the assessee is not in the nature of 'royalty and thus, the AO is directed to delete the 17 ITA 1563/Mum/2022 Edenred SE addition an this account. As a result, ground No. 3 raised in assessee's appeal is allowed." 15. Regarding the contention of the Ld.DR that MFN is not applicable in the case of the assessee by referring the CBDT circular cited above, we notice that in the case of GR1 Renewable Industries S.L. (supra), the coordinate bench of Pune Bench of the Tribunal held that CBDT circular dated 03/02/2022, cannot be invoked for the assessment year 2016-17 which is much prior to the CBDT circular of the year 2022. The finding of the Tribunal is as under : "13. Notwithstanding the above, it can be seen that the CBDT has panned out a fresh requirement of separate notification to be issued for India importing the benefits of the DTAA from second State to the DTAA with the first State by virtue of its Circular, relying on such requirement as supposedly contained in section 90(1) of the Act. In our considered opinion, the requirement contained in the CBDT circular No. 03/2022 cannot primarily be applied to the period anterior to the date of its issuance as it is in the nature of an additional detrimental .stipulation mandated for taking benefit conferred by the DTAA. It is a settled legal position that a piece of legislation which imposes a new obligation or attaches a new disability is considered prospective unless the legislative intent is new disability of a separate notification for importing the benefits of an Agreement with the second State into the treaty with firs! State. Obviously, such a Circular cannot operate retrospectively to the transactions taking place in any period anterior to its issuance. In view of the foregoing discussion, we are satisfied that the requirement of a separate notification for implementing the MFN clause, as per the recent CBDT circular dt. 03-02-2022, cannot he invoked for the year under consideration, which is much prior to the CBDT circular of the year 2022." 16. Further we have also noticed that the co-ordinate bench in assessee's in ITA No.508/Mum/2016 & 7247/Mum/2017 for the assessment 20l2-13 & 2013-14 respectively has held that CBDT circular is not applicablee to the case of the assessee with the following observations:- "42. Thus, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we are of the considered view that CBDT Circular No. 3/2022 dated 03/02/2022 is not applicable to the present appeal. Therefore, in view of the aforesaid findings, we are of the considered opinion that the assessee is entitled to claim the benefit of the restricted definition under India USA DTAA in view of the Protocol to the India France DTAA. Since the assessee has been found not to have 'made available' any technical know/edge, experience, skill, or know-how, therefore, Management Service Fees received by the assessee cannot be taxed under the provisions of Article 13 of the India France DTAA read with para 7 of the Protocol to the India France DTAA and Article 12(4} of India USA DTAA. In view of the above, the alternative claim of the assessee under India Fin/and DTAA becomes academic. Further, once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions 18 ITA 1563/Mum/2022 Edenred SE of the Act, as in terms of section 90(2). The taxability of impugned receipts, under section 9(l)(vii) of the Act, is thus wholly academic. Hence, the AO is directed to delete the addition on this account. Accordingly, ground No. 2 raised in assessee's appeal is allowed," 17. Therefore, following the decision of the co-ordinate benches as discussed above (supra) on similar issue and identical facts, grounds 3, 4 & are allowed.” 13. The facts and the nature of services rendered by the assessee being identical for the year under consideration, we hold that the management fees received by the assessee from Indian group companies should not be treated as FTS and accordingly, not taxable in India. This ground is allowed in favour of the assessee. Guarantee Fees – Ground No.5 14. The assessee, while filing the return of income has offered the guarantee fees received to the extent of Rs.42,07,277/- to tax. Before the DRP, the assessee filed a revised statement of income in which, the assessee claimed that the guarantee fees should not be taxed in India. The assessee in this regard submitted that during the year under consideration Edenred India and Accentiv has entered into an arrangement for working capital facilities with Kotak Mahindra Bank Ltd, Chennai and Citibank, Chennai, respectively. The assessee being the parent company has provided a corporate guarantee to the subsidiaries with respect to such facilities obtained from respective banks. The assessee further submitted that the corporate guarantee is given in the normal course of business to facilitate the operations of the Indian subsidiary in India and for commercial expediency. As per the agreement between assessee and its subsidiary, the assessee charges 0.5% towards guarantee fees as a percentage of total loan facility availed. Accordingly, the assessee has received an aggregate of Rs.42,07,277 towards guarantee fees from its subsidiary on which the subsidiary has deducted tax @40% out of 19 ITA 1563/Mum/2022 Edenred SE abundant caution. The assessee claimed that the guarantee fees should not be taxed in India and that therefore wished to modify the claim. The assessee in this regard relied on the CBDT cirdular No.14(XL-35) dated 11.04.1955. The DRP did not accept the submissions of the assessee that the guarantee fees is not taxable in India by holding that the claim could be made only through filing the revised return of income and since the assessee did not file any revised return the claim made through revised statement of income cannot be accepted. The DRP in this regard relied on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC) and rejected the claim. 15. The Ld.AR submitted that the DRP did not go into the merits of the issue but has rejected the claim on the ground that it is not made in the return of income. Accordingly, the Ld.AR prayed that the issue may be remitted back to the Assessing Officer for fresh examination. The Ld.DR did not raise any objection to the claim of the Ld. AR. 16. We heard the parties and perused the material on record. The assessee while filing the return of income has offered the income received by way of guarantee commission to tax. Before the DRP the assessee submitted that the same is not taxable under the provisions of the Act and accordingly submitted that the amount be held as not taxable. The DRP without going into the merits of the assessee's claim rejected the ground holding the assessee can make this fresh claim only through revised return of income and since the assessee has not filed the revised return but made the claim through a letter the same cannot be considered. The DRP has relied on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra). In this regard it is relevant to note from the last paragraph of 20 ITA 1563/Mum/2022 Edenred SE the said decision of Goetze (India) Ltd. (supra) where it has been categorically mentioned by the Hon'ble Supreme Court that any valid claim of the assessee could be entertained by the appellate authorities. It is also noticed that the Hon'ble Jurisdictional High Court in the case of CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 23 taxmann.com 23/208 Taxman 498/349 ITR 336 (Bom.) had held that any valid claim of assessee could be made for the first time either by way of filing a revised computation or before the appellate authorities. In assessee's case the claim is made for the first time before the DRP that the guarantee fees earned by the assessee is not taxable as per the DTAA. Considering the judicial precedence and the facts of the present case we are of the view that, if the assessee is entitled for a deduction, as per law and facts, same should not be denied merely because the claim was not made in the return of income. Since the lower authorities have not examined the issue on merits, we remit the issue back to the Assessing Officer for a fresh examination of taxability of guarantee fees in India and decided in accordance with law, after giving a reasonable opportunity of being heard / make submissions to the assessee. It is ordered accordingly. This ground is allowed for statistical purposes. 17. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 04/08/2023. Sd/- sd/- (VIKAS AWASTHI) (PADMAVATHY S) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 04 th August, 2023 Pavanan 21 ITA 1563/Mum/2022 Edenred SE प्रतितिति अग्रेतििCopy of the Order forwarded to : 1. अिीिार्थी/The Appellant , 2. प्रतिवादी/ The Respondent. 3. आयकर आयुक्त CIT 4. तवभागीय प्रतितिति, आय.अिी.अति., मुबंई/DR, ITAT, Mumbai 6. गार्ड फाइि/Guard file. BY ORDER, //True Copy// Asstt. Registrar / Senior Private Secretary ITAT, Mumbai