MWH UK LTD, MUMBAI V. DCIT (IT) 3(2)(2), MUMBAI

ITA 6619/MUM/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1298 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Advance ruling; TDS
• Section: 205; 9(1); 9(1); 9(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI RAHUL CHAUDHARY, JM IT A N o. 6 61 9/ Mu m /20 17 (As se ss me nt Y ea r: 20 14- 15 ) MWH UK Ltd. India Bulls Finance Centre, Tower-3, 28 th Floor, Elphinstone Mills Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA H CM 3 42 9 K (Appellant) : (Respondent) IT A N o. 7 88 1/ Mu m /20 19 (As se ss me nt Y ea r: 20 16- 17 ) Stantee UK Ltd. (Formerly known as MWH UK Ltd.) C/o. Deloitte Haskins & Sells LLP One International Centre, Tower 3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Lower Parel (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA H CM 3 42 9 K (Appellant) : (Respondent) IT A N o. 2 60 7/ Mu m /20 17 (As se ss me nt Y ea r: 20 13- 14 ) MWH Consultants (S) Pte. Ltd. India Bulls Finance Centre, Tower-3, 28 th ,32 nd Floor, Elphinstone Mills Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA G CM 9 04 1 C (Appellant) : (Respondent) 2 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others IT A N o. 2 09 4/ Mu m /20 16 (As se ss me nt Y ea r: 20 12- 13 ) MWH Globaal Inc. C/o. Deloitte Haskins & Sells LLP India Bulls Finance Centre, Tower 3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Lower Parel (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 2 Q (Appellant) : (Respondent) IT A N o. 2 54 4/ Mu m /20 17 (As se ss me nt Y ea r: 20 13- 14 ) Mustang Acquisiton Holdings Inc. [formerly known as ‘MWH Global Inc.’] C/o. Deloitte Haskins & Sells LLP One International Center, Tower 3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Lower Parel (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 2 Q (Appellant) : (Respondent) IT A N o. 6 88 0/ Mu m /20 17 (As se ss me nt Y ea r: 20 14- 15 ) MWH Global Inc India Bulls Finance Centre, Tower 3, 28 th , 32 nd Floor, Elphinstone Mills Compound, Senapati Bapat Marg, Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 2 Q (Appellant) : (Respondent) IT A N os . 25 & 2 6/ Mu m/ 20 21 (As se ss me nt Y ea rs : 20 16 -1 7 & 20 17 -1 8) Mustang Acquisition Holdings Inc. [formerly known as ‘MWH Global Inc.’] C/o. Deloitte Haskins & Sells LLP One International Center, Tower 3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Lower Parel (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 2 Q (Appellant) : (Respondent) 3 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others IT A N o. 2 09 5/ Mu m /20 16 (As se ss me nt Y ea r: 20 12- 13 ) MWH Americas Inc. C/o. Deloitte Haskins & Sells LLP Bulls Finance Centre Tower-3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 0 N (Appellant) : (Respondent) IT A N o. 2 54 5/ Mu m /20 17 (As se ss me nt Y ea r: 20 13- 14 ) MWH Americas Inc. India Bulls Finance Centre Tower-3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 0 N (Appellant) : (Respondent) IT A N o. 6 02 5/ Mu m /20 17 (As se ss me nt Y ea r: 20 14- 15 ) MWH Americas Inc. C/o. Deloitte Haskins & Sells LLP India India Bulls Finance Centre Tower-3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 0 N (Appellant) : (Respondent) IT A N o. 5 91 8/ Mu m /20 18 (As se ss me nt Y ea r: 20 15- 16 ) MWH Americas Inc. C/o. Deloitte Haskins & Sells LLP India India Bulls Finance Centre Tower-3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 0 N (Appellant) : (Respondent) 4 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others IT A N o. 6 67 8/ Mu m /20 19 (As se ss me nt Y ea r: 20 16- 17 ) MWH Americas Inc. C/o. Deloitte Haskins & Sells LLP India India Bulls Finance Centre Tower-3, 28 th Floor, Elphinstone Mill Compound, Senapati Bapat Marg, Elphinstone (W), Mumbai-400 013 Vs. DCIT (IT)-3(2)(2) Mumbai PA N/ GI R No . AA I CM 5 74 0 N (Appellant) : (Respondent) Appellant by : Shri Jehangir D. Mistri/ Shri Niraj Sheth Respondent by : Shri Milind Chavan Dat e of H ea ri ng : 20.04.2022 Dat e of P ro no un ce me nt : 25.05.2022 O R D E R Per Bench: These are appeals by the respective assessees against the respective orders of the Assessing Officer (A.O. for short) passed by the Dispute Resolution Panel-3 (WZ), Mumbai. Since the issues are common and connected and the appeals were heard together, these have been disposed of by this common order. 2. At the outset, in this case, the ld. Counsel of the assessee submitted a chart wherein he submitted that ground no.1 in all these appeals relates to taxation of fees received for services rendered as fees for technical services. In this regard, he referred to ITA No. 6619/Mum/2017 for the A.Y. 2014-15 in the case of MWH UK Ltd. (Stantec UK) and submitted that the issue is covered in favour of the assessee by the decision of the ITAT in assessee’s own case for the A.Y. 2012-13. The ld. counsel submitted that facts in all the cases are identical with identical agreements. The submissions of ld. counsel in summarized form in ITA No.6619/Mum/2017 on this issue reads as under:- 5 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others “The assessee is a tax resident of the UK and is eligible to claim benefits under the India – UK DTAA. During the year under consideration it provided various consultancy/technical/managerial services to MIPL and MRIPL as listed below: • Corporate planning and development; • Corporate legal services and risk management; • Corporate human resource management; • Global professional indemnity insurance; • Global IT Networks The term “fees for technical service” under Article 13 of the India-UK DTAA is defined as under – the relevant extract of the said definition is re: 4. The term "fees for technical services" as used in this Article technical means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) is such services : (a) .............; Or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology Contained therein; or (c) .......... As is evident therefrom, for a payment to fall within the definition of the term "fees for technical service" under Article 13 of the India-UK DTAA the following conditions are required to be fulfilled concurrently: Firstly, the payment is to be made by way of consideration for services of a managerial, technical or consultancy nature, and Secondly, such services should 'make available' technical knowledge, skill, experience, etc. to recipient of the services. The term "make available" is also used in the India-US DTAA and the wordings of the relevant Article are similar to that of the India-UK DTAA, accordingly one can refer to the paragraph 4(b) of the Memorandum of Understanding attached to the India-US DTAA which explains, the scope of the phrase 'make available' as under: "Generally speaking, technology will be considered “made available” when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which the embodies technology shall not per se be considered to make the technology available." Thus in other words, make available is interpreted to mean, making available technical knowledge, experience, skills, et, in such a manner that the recipient is enabled to use the same independently in future without any recourse to the original provider. Accordingly, if the services do not enable the recipient to independently perform the services in future, the same would not be considered as "fees for technical services" as per the India-UK DTAA and hence the same are not chargeable to tax in India. 6 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others The law is by now settled so far as the connotations of 'make available' clause in the definition of 'fees for technical services' in the tax treaties are concerned. It is held to be a condition precedent for invoking this clause that the services should enable the person acquiring the services to apply technology contained therein The above proposition has also been upheld by several judicial pronouncements/decisions of the various High Courts and Income Appellate Tribunals, wherein it was held that mere rendering technical service would not amount to fees for technical service unless the person utilizing the service is able to make use of the technical knowledge, etc. by him in the future. An illustrative list of decisions on the subject are as under:- DCIT V/s. Boston Consulting Group Pte. Ltd (2005) 94 ITD 31 (Mumbai) • DIT v/s. Guy Carpenter and Co. Ltd. (2012) 346 ITR 504; • CIT v/s .De Beers Indla Minerals (P.) Ltd. (20121 346 ITR 457; • Intertek Testing Services India Pvt. Ltd. (2008) 307 ITR 418; • Sheraton International Inc. V/S. DDIT (2007) 10 SOT 542; • Raymond Limited v/s. DCIT (2003) 86 ITD 791; • ICICI Bank Ltd. v/s. DCIT (2008) 20 SOT 453 • NQA Quality Systems Registrar Ltd. v/s. DCIT (2005) 92 TTJ 946 • Filtrex Technologies Pvt. Ltd. vs. ACIT reported in (2011) 13 taxmann.com 21 In the instant case too, the assessee company has rendered various corporate services to MIPL and these services does not fall within the definition of the term 'fees for technical services' as defined under Article 13 of the India - UK DTAA - since no technical Knowledge, experience, skill, know-how or processes, etc., is made available to MIPL. Here it will also be appreciated that the services in question are broadly in the nature of 'managerial services' which are not covered within the definition of the term fees for technical services” as per the India-Uk DTAA and hence the sane taxable in terms of the India-UK DTAA. In view of the foregoing, it is submitted and will be appreciated that the fees received by the assessee company for rendering services to MIPL and MRIPL are not taxable in India since the same do not fall within the ambit of the definition of ‘fees for included services’ as defined in Article 13 of the India - UK DTAA. The DRP does not follows its Order/directions in the case of assessee for the Assessment Year 2012-13 on the ground that DRP directions are no longer appealable by the department and the department for the Assessment Year 2012-13 has filed an appeal to the Income-tax Appellate Tribunal - refer page no. 07 and para no. 5.2 of the DRP directions of the captioned year. Attention in this regard is also invited to the decision of the Mumbai Bench of the Income Tax Appellate Tribunal in the Appellant's own case for the Assessment Years 2012-13 and 2013-14 in ITA Nos. 961/M/2016 and 2543/M/2017 where in the Tribunal has held that the fees received by the Appellant for rendering services to MIPL and MRIPL are not taxable in India Since the same do not fall within the ambit of the definition of ‘fees for included services' as defined in Article 13 of the India – UK DTAA - Copy enclosed – refer "Appendix - A".” 7 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others 3. Ground No.2 in these appeals (except for ITA Nos.2094/Mum/2016, 26/Mum/2021 & 2095/Mum/2016) relates to taxability of reimbursement of expenses as fees for included services/technical services. The ld. ld. Counsel of the assessee in this regard pleaded that if ground no. 1 is decided in favour of the assessee then this ground becomes infructuous. 4. The other grounds raised were application of incorrect tax rate, shortfall in giving credit to TDS and levy of interest u/s 234B. It was submitted that these grounds are consequential and AO may be directed to look into and give effect. 5. Per contra, the ld. Departmental Representative (ld. DR for short) in this regard submitted that though the ld. Counsel of the assessee submits that the agreements with the AEs’ in all the group cases are identical, but this has not been so proved by production of agreements with other group entities, except for MWH UK Ltd. (Stantec UK) and MWH Consultants (S) Pte. Ltd., i.e., in ITA No. 6619/M/2017, ITA No. 7881/Mum/2019 and ITA No. 2607/Mum/2017. The ld. DR submitted that in all the other cases, the concerned agreements were not produced before the Dispute Resolution Panel (DRP for short) and the same has been so noted by the DRP. In the submission dated 21.04.2022, the ld. DR by means of a chart has made following submissions:- “1. MWH Global Inc. (now known as Mustang Acquisition Holding Inc. ) MWH Global Inc. has received fees for services rendered from two Indian AEs viz. MWH India Pvt. Ltd. (MIPL) and MWH Resource Net (India) Pvt. Ltd. (MRNPL). The service agreements signed by MWH Global Inc. with these two AEs have not been furnished to the DRP which is evident from the following table. Sr. no. in cause list ITA No. Assessment Year Remarks 8 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others 1 ITA 2094 MUM 2016 2012-13 In para no. 4.20 on page 12 of the DRP order of A.Y.2012-13 it is mentioned as lithe AR was requested to file the Service agreements entered into between the assessee & MIPL and between the assessee and MRNPL. Despite our repeated request, these agreements have not been furnished to us. 3 ITA 2544 MUM 2017 2013-14 In para no. 8.5 on page 11 of the DRP order of A.Y.2013-14 it is mentioned as lithe AR was requested to file the Service agreements entered into between the assessee & MIPL and between the assessee and MRNPL. Despite our repeated request, these agreements have not been furnished to us. 8 ITA 6880 MUM 2017 2014-15 In para no.8.5 on page 13 of the DRP order of AY 2014-15 it is mentioned as lithe AR was requested to file the Service agreements entered into between assessee & MIPL and between the assessee and MRNPL. Despite our repeated request, these agreements have not been furnished to us. 22 ITA 25 MUM 2021 2016-17 The DRP has relied on the order of the DRP for A.Y.2013-14 and has reproduced the extracts of the order of A.Y.2013-14 in para no. 2.3.11 on page 15 to page no.28. In the second last para on page no. 26 of the DRP order of A.Y.2016-17 it is mentioned as “the AR was requested to file the Service agreements entered into between the assessee & MIPL and between the assessee and MRNPL. Despite our repeated request, these agreements have not been furnished to us" 23 ITA 26 MUM 2021 2017-18 The DRP has relied on the order of the DRP for A.Y.2013-14 and has reproduced the extracts of the order of A.Y.2013-14 in para no. 2.2.10 on page 12 to page no.24. In the first para on page no. 24 of the DRP order of A.Y.2017-18 it is mentioned as lithe AR was requested to file the Service agreements entered into between the assessee & MIPL and between the assessee and MRNPL. 9 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others Despite our repeated request, these agreements have not been furnished to us. 2. MWH America Inc. MWH America Inc. has received fees for services rendered from two Indian AEs viz. MWH India Pvt. Ltd. (MIPL) and MWH Resource Net (India) Pvt. Ltd. (MRNPL). The service agreements signed by MWH America Inc. with these two AEs have not been furnished to the DRP which is evident from the following table. Sr. no. in cause list ITA No. Assessment Year Remarks 2 ITA 2095 MUM 2016 2012-13 In para no. 4.20 on page 14 of the DRP order of A.Y.2012-13 it is mentioned as lithe AR was requested to file the Service agreements entered into between the assessee & MIPL and between the assessee and MRNPL. Despite our repeated request, these agreements have not been furnished to us. 4 ITA 2545 MUM 2017 2013-14 In para no. 2.4.2 on page 10 of the DRP order of A.Y.2013-14 it is mentioned that similar issue has been decided by the DRP in A.Y.2012-13 and relief has been allowed. This is an error as in A.Y.2012-13 the DRP had given the decision against the assessee. However the DRP had finally rejected the objection of the assessee. Since the DRP has relied on the DRP order of A.Y.2012-13 which states that the service agreements were not submitted. It is clear that the service agreements were not submitted to the DRP for A.Y.2013- 14 also. 6 ITA 6025 MUM 2017 2014-15 In para no. 2.2.2 on page 12 of the DRP order of A.Y.2014-15 it is mentioned that similar issue has been decided by the DRP in A.Y.2012-13 and relief has been allowed. This is an error as in 10 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others A.Y.2012-13 the DRP had given the decision against the assessee. However the DRP had finally rejected the objection of the assessee. Since the DRP has relied on the DRP order of A.Y.2012-13 which states that the service agreements were not submitted. It is clear that the service agreements were not submitted to the DRP for A.Y.2014- 15 also. 15 ITA 5918 MUM 2018 2015-16 In the first para on page 15 of the DRP order of A.Y. 2015-16 it is mentioned as "The assessee was asked to produce the copy of the Service agreements in support of its claim that there was no such character imbedded in the service which was of "make available" nature. The authorised representative during the proceedings failed to produce the agreement." 20 ITA 6678 MUM 2019 2016-17 In para no. 5.3.4 on page 14 of the DRP order of A.Y.2016-17 it is mentioned as "As stated, we are of the considered view that the assessee has not been able to show with any clarity whatsoever that there was no make available in respect of the services provided to the AEs. The non-furnishing of the agreements between it and the AEs is inexplicable and renders the factual submissions as its ipse dixit" From the above it is clear that the service agreements were not submitted to the DRP for A.Y.2016- 17 also. 3. MWH Consultants (S) Pte Ltd. MWH Consultants (S) Pte. Ltd. has received fees for services rendered from two Indian AEs viz. MWH India Pvt. Ltd. (MIPL) and MWH Resource Net (India) Pvt. Ltd. (MRNPL). 11 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others Sr. no. in cause list ITA No. Assessment Year Remarks 5 ITA 2607 MUM 2017 2013-14 In para no. 4.17 on page 9 of the DRP order of A.Y.2013-14 it is mentioned that the copies of the service agreements were provided to the DRP. The two Indian AEs viz. MWH India Pvt. Ltd. (MIPL) and MWH Resource Net (India) Pvt. Ltd.(MRNPL) had entered in to service agreements with a) MWH Global Inc. b) MWH America Inc. c) MWH Consultants (S) Pte. Ltd. and d) MWH UK Ltd.. The Honourable ITA T has decided the appeals in the case of MWH UK Ltd. for A.Y.2012-13 and A.Y.2013-14 vide its order dated 29.12.2021 in ITA no.961/M/2016, ITA no.2096/M/2016 and ITA no. 2543/Muml2017. In these decisions the service agreements signed between MWH UK Ltd. and the two AEs have been considered. From the above tables it can be seen that the copies of service agreements signed between the two Indian AEs viz. MWH India Pvt. Ltd. (MIPL) and MWH Resource Net (India) Pvt. Ltd.(MRNPL) with MWH Global Inc. and MWH America Inc. have not been produced before the DRP. Before the Honourable Bench the counsel of the appellant claims that all the service agreements signed by the two AEs with the four foreign companies are for the same services. However this has not been verified by the DRP/assessing officer in the case of MWH Global Inc. and MWH America Inc. as the service agreements have not been produced before them. Further it is to be seen whether the services satisfy the make available test or not. Therefore it is humbly requested that the 5 appeals in the case of MWH Global Inc. and 5 appeals in the case of MWH America Inc. may be restored back to the Assessing Officer with the direction to the appellant to submit the service agreements in respect of these two companies before the assessing officer. In the case of MWH Consultants (S) Pte Ltd. it is to be seen whether the service agreements signed between MWH Consultants (S) Pte Ltd. and the two AEs and the service agreements signed between MWH UK Ltd. and the two AEs are for the same services. Since the counsel of the appellant relies on the IT A T order in the case of MWH UK Ltd and claims that the services are same.” 6. We have carefully considered the submission and perused the material available on record. As regards ground no.1, the ld. Counsel of the assessee was asked to point out whether the claim of ld. DR as borne out by the relevant portion of orders referred by ld. 12 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others DR, can be said to be not correct. No response in this regard is available. Hence the agreements in other group concerns which the ld. counsel claims to be of the same type have not been produced before the Revenue authorities. In this regard, only the canvassing has been done that they are in the same lines as in the case of first appeal. However, the ld. Counsel of the assessee has not rebutted the claim of the ld. DR that the necessary agreements were not produced before the DRP. In these circumstances, we are of the opinion that following the ratio emanating from the ITAT decision in the case of MWH Ltd. by the order dated 29.12.2021, the first issue relating to taxation of fees receipt as fees for technical services has to be decided in favour of the assessee only in cases where the agreements have been produced before the authorities below. This is for MWH UK Ltd. and MWH Consultants (S) Pte. Ltd. for which the necessary agreements with AEs were there before the authorities below. The ITAT in such case has held that on the basis of these agreements, the receipt cannot be treated as fee for technical services. We may gainfully refer to the adjudication in ITA No.961/Mum/2016 AY 2012-13 and ITA No.2543/Mum/2017 AY 2013-14, in case of MWH UK Ltd. (Stantee U.K.), the ITAT vide order dated 29.12.2021 has held as under :- “ITA No. 961/MUM/2016 Assessment Year: 2012-13 13. The solitary ground of appeal of the Revenue is directed against the order of DRP dated 28th December 2015 in holding that services rendered by the assessee- company are broadly in the nature of “managerial services” which are not covered within the scope of definition of the term “fees for technical services” as per Article 13 of India-UK DTAA. During the course of draft assessment, the AO observed that the assessee-company has received a sum of ₹5,33,30,236/- from MWH India Pvt. Ltd. and MWH Resourcenet (India) Pvt. Ltd. as technical services fees and claimed as exempt. On query, the assessee explained that the technical services should not qualify as “fees for included services” under Article of the Indo-UK Taxation treaty and should not be liable to tax in India. During the course of assessment, the assessee has submitted the 13 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others copies of agreement entered into with the associated enterprises, copies of invoices raised for the services, the details of their personnel visiting India for rendering the services and other supporting documents. The AO observed that during the year under consideration, the assessee has provided various consultancy/technical/managerial services to MWH India Pvt. Ltd. and MRPL as under : • Corporate Planning and Development • Corporate accounting, tax, finance and treasury function • Corporate legal services and risk management • Corporate Human Resource Management • Global Professional Indemnity Insurance • Corporate Communications • Global IT Networks 14. The Assessing Officer was of the view that fees for technical services is an income of the non-resident entity and is therefore deemed to accrue or arise in India u/s 9(1)(vii) r.w.s. Explanation 2 of the Income Tax Act, 1961. The AO has also stated that as per para 13 of DTAA between India and UK the fees for technical services are taxable as under : “Article 13(4)(c) The term “fees for technical services” for the purpose of paragraph 2 of this Article means payments of any kind to any person in consideration for rendering of any technical or consultancy services (including the provisions of services of technical or other personnel) which c) make available technical knowledge, experience, skill, knowhow or processes, or consist of the development and transfer of a technical plan or technical design.” 15. The AO stated that as per Article 13 of the Indo-UK Treaty with special reference to para 4 in the “fees for technical services” means payments to any person in consideration for the rendering of any technical or consultancy services. M/s MWH India Pvt. Ltd. MRPL are providing technical/engineering/consultancy services. Therefore, the amount paid by M/s MWH India Pvt. Ltd. and MWH Resourcenet (India) Pvt. Ltd. will be covered under “fees for technical services”. The AO further stated that the technical knowledge, experience, skill processed by the assessee- company with regard to various aspect was made available in the form of advice or service which were finally used in the decision making process of matters concerning not only in management but also in financial, legal, treasury, planning communication and human resources. Accordingly, the fees received by the assessee on account of corporate services were treated as fees for technical services as per Article 13 of the Indo-UK DTAA. 14 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others 16. The DRP in its finding held that on perusal of the agreement it is evident that the services rendered by the assessee-company were broadly in the nature of managerial services which were not covered within the scope of evidences of the term “fees for technical services” as per Article 13 of the India-UK DTAA. The assessee- company has rendered various corporate services to its Indian entity which does not fall within the scope of term “fees for technical services” as defined under Article 13 of the India-UK DTAA. The relevant finding of the DRP are reproduced as under : “6.14 We have considered the facts of the case and the submissions of the assessee. On perusal of the service agreement it is evident that the following services have been provided by the assessee company to its Indian entity. • Corporate planning and development • Corporate legal services and risk management • Corporate human resource management • Global professional indemnity insurance; • Global IT networks 6.15 The various components of the services rendered in each of the aforesaid broad heads has been detailed in the Appendix 1 to the Agreements which is reproduced hereunder: Services rendered Components Corporate Planning and Development Laying down strategies, forecasting and planning, assistance in marketing, arranging finance, etc. Corporate legal services and risk management For the work performed by the Counsel of the group which benefits the regional operations. Corporate human resource management Majorly in the nature of compensation co-ordination and review; development of expatriate policies etc. Global professional indemnity insurance Professional indemnity insurance is effected and maintained by MWH Global Inc. and covers every subsidiary within the group. As a result of arranging insurance globally every subsidiary benefits from a lower premium cost and wider coverage as the group takes advantage of economies of scale and greater purchasing power. 15 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others Global IT Network Support for IT systems and processes. 6.16 Before arriving at the taxability of the services as performed by the assessee company it is pertinent that one understands the meaning of the term fees for technical services" as defined in the Income-tax Act, 1961 and Article 13 of the India - UK DTAA. i) In terms of provisions of section 9(1)(vi) of the Income-tax Act, 1961 if the consideration paid for rendering technical services constitutes income by way of fees for technical services, it is taxable - The term "fees for technical services" has been defined to mean any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services in terms of Explanation 2 to section 9(1) (vi). The said Explanation reads as under: "Explanation 2).-For the purposes of this clause, "fees for technical services” means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries"." ii) As per Article 13 of India - UK DTAA "fees for technical services" means the payment of any amount to any person in consideration for rendering of any technical services only, if such services make available technical knowledge, expertise, skill, know-how or processes. If the technical knowledge expertise, skill, know how or process is not made available by the service provider, who has rendered technical service for the purpose of Article 13 of DTAA it would not constitute fees for technical services. To that extent the definition of fee for technical services found in the DTAA is inconsistent with the definition of fees for technical services provided in Explanation 2 to clause (vii) of sub-section (1) of section 9. 6.17 On a conjoint reading of section 9(1)(vin) and Article 13 of the India – UK DTAA, it emerges that "fees for technical service' is a consideration received in the hands of the recipient, provided such technical knowledge or know how etc. are 'made available' to the person who made the payment in lieu of those services. Broadly speaking, "make available means to allow somebody to make use of the know-how or knowledge. 6.18 The terms 'make available' means that the person receiving the services has been enabled to utilize that knowledge or the receiver has become wiser to utilize that knowledge independently. Mere rendering of services is not enough unless the person utilizing the knowledge is able to make use of that technical knowledge by himself for his own benefit independently i.e. without the guidance of the said service provider. 16 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others 6.19 On perusal of the agreement it is evident that the services rendered by the assessee company are broadly in the nature of 'managerial services' which are not covered within the scope of definition of the term "fees for technical services as per Article 13 of the India-UK DTAA. The assessee company has rendered various corporate services to its Indian entity which in view of the discussion above does not fall within the scope of the term fees for technical services' as defined under Article 13 of the India - UK DTAA. 6.20 Accordingly, since none of the services rendered by the assessee company "make available" any technical knowledge, skill, etc., the same are not chargeable to tax in India. Further by applying the provisions of section 90(2) of the Income-tax Act, 1981 and consequently the Article 13 of the India - UK DTAA will apply since it is beneficial to the assessee company and hence the fees received by the assessee company is not liable to tax in India. 6.21 With regard to the judicial decisions relied upon by the learned Assessing Officer and the assessee company it is seen that the various High Courts and the Tribunals have now passed a number of judicial pronouncements wherein it was held that mere rendering of technical service would not amount to fees for technical service unless the person utilizing the service is able to make use of the technical knowledge, etc. by him in the future - some of the judicial decisions are mentioned below: • Decision of the Bombay High Court in the case of Diamond Services International P. Ltd v/s. Union of India (2008) 169 Taxman 201; • Decision of the High Court of Delhi in the case of DIT v/s. Guy Carpenter and Co. Ltd. (2012) 346 ITR 504; • Decision of the High Court of Karnataka in the case of CIT v/s .De Beers India Minerals (P.) Ltd. (2012) 346 ITR 457; • Decision of the Authority for Advance Ruling in the case of Intertek Testing Services India Pvt. Ltd. (2008) 307 IT 418; • Decision of the Delhi Bench of Income-tax Appellate Tribunal in the case of Sheraton International Inc. V/s. DDIT (2007) 10 SOT 542; • Decision of the Mumbai Bench of Income-tax Appellate Tribunal in the case of Raymond Limited v/s. DCIT (2003) 86 ITD 791: • Decision of the Mumbai Bench of Income-tax Appellate Tribunal ICICI Bank Ltd. V/s. DCIT (2008) 20 SOT 453 • Decision of the Delhi Bench of Income-tax Appellate Tribunal in the case of NQA Quality Systems Registrar Ltd. V/s. DCIT (2005) 92 TTJ 946 • Decision of the Bangalore Bench of the Income-tax Appellate Tribunal in the case of Filtrex Technologies Pvt. Ltd. Vs. ACIT reported in (2011) 13 taxmann.com 21 17 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others 6.22 In view of the above discussion, the action of the Assessing Officer is not considered to be justified and hence the Assessing Officer is directed to delete the proposed variation in the Draft Assessment Order. 17. During the course of appellate proceedings before us, the Ld. DR has referred para 4 of the draft assessment order stating that assessee has not produced the copy of agreement for rendering such services. The Ld. DR has also submitted that services provided by the assessee were not general in nature and were provided by professionals and services were highly technical, technical knowledge experience processed by the assessee-company was made available in the form of advice or service which were finally made or use by MWH India Pvt. Ltd. and MRPL in the decision making process. 18. On the other hand, the Ld. counsel has referred page No. 70 of the Paper Book a letter dated 27th March 2015 submitted before the Assessing Officer as per point No. 4 a photocopy of the agreement for the supply of corporate services entered into between the assessee-company and MIPL was furnished along with appendix. The Ld. counsel has also referred Article 13 para 4 and sated that para (a), (b) & (c) are not applicable to the case of the assessee. 18.1 The Ld. counsel has also referred para 6.19 and 6.20 order of the DRP wherein the DRP after examination of the material on record, agreement of services and provision of Article 13 of the India-UK DTAA categorically held that the services rendered by the assessee-company were broadly in the nature of managerial services which were not covered within the scope of definition of the term “fees for technical services” as per Article 13 of the India-UK DTAA. The DRP at para 6.20 of the order has also stated that applying the provisions of section 90(2) of the Income Tax Act, 1961 and consequently the Article 13 of the India-UK DTAA would be applied and the fees received by the assessee-company was not liable to tax in India. 19. Heard both the sides and perused the material on record. During the course of assessment, the Assessing Officer has treated the amount of ₹5,33,30,236/- received by the assessee being corporate charges from its associate concerns as fees for technical services under Article 13 of the DTAA entered into and subsisting between India and the UK (India-UK DTAA) for the year under consideration. However, the DRP in their finding dated 28 th December 2015 held that the services rendered by the assessee- company were broadly in the nature of managerial services which were not covered within the scope of definition of the term “fees for technical services” as per Article 13 of the India-UK DTAA. It was held that the assessee-company had rendered various corporate services to its India entity which does not fall within the scope of the term “fees for technical services” as defined under Article 13 of the Indo-UK DTAA. The DRP has also stated that none of the services rendered by the assessee-company “make available” any technical knowledge, skill etc. and same were not chargeable to tax in India. Further, by applying the provisions of section 90(2) of the Income Tax Act, 1961 and the Article 13 of the India-UK DTAA the fees received by the assessee-company was not liable to tax in India. On perusal of the material on record, it is observed that during the year under consideration the assessee has provided various corporate services to its Indian entity MIPL and MRPL for which both the entities have paid corporate charges to the assessee. During the course of assessment, the assessee has 18 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others made submissions stating that the corporate services provided by the assessee were for the internal management of the MWH Group as a whole and not for providing any services to the third parties. The kind of services provided by the assessee were consisting of procuring bank guarantees, forecasting, objecting evaluation, negotiations of global profession liability insurance policy arrangement and provisions of professional etc. It is also noticed that during the course of assessment proceedings, the assessee-company has submitted copies of agreement between the assessee- company and its Indian entity for the supplying of corporate services as placed at page 76 to 81 of the Paper Book. The assessee has also submitted copies of invoices raised by the assessee for corporate services as placed at page No. 82 to 172 of the Paper Book. In this regard, it is noticed that Assessing Officer has not referred to any of these documents/invoices/agreements filed during the course of assessment proceedings and has not dis-proved the facts reported in these documents and agreements to the claim of the assessee that it has provided corporate services to its Indian entities for which it raised invoices from time to time as fees for the corporate services rendered by it. The assessee has also given complete detail of nature of services performed by it during the year under consideration mainly laying down strategy, financing and planning, assisting in marketing arranging finance etc. With the assistance of the Ld. Representative, we have also gone through the Article 13 of the India-UK DTAA. The relevant extract of the said is reproduce as under : (a) payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary, artistic or scientific work, including cinematography films or work on films, tape or other means of reproduction for use in connection with radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience; and (b) payment of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than income derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic. 4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3(a) of this article is received ; or b) are ancillary and subsidiary to the enjoyment of the property for which a payment described in paragraph 3(b) of this Article is received ; or c) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. 19 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others It is clear from the terms of the Article 13 referred above that for a payment to fall within the definition of the term fees for technical services under Article 13 of the India-UK DTAA the following conditions are required to be fulfilled concurrently: • Firstly, the payment is to be made by way of consideration for services of a managerial, technical or consultancy nature, and • Secondly, such services should ‘make available’ technical knowledge, skill, experience, etc. to recipient of the services. The term “make available” is used in the India-UK DTAA which means that the Indian entity is enabled to use the technical knowledge, experience, skill etc. independently in future without any recourse to the assessee-company. The Assessing Officer has not demonstrated in his finding that how the services in question make available any technical knowledge, skill etc. to the associate concerns and how the same were made available to the third parties. We have also perused the following judicial pronouncement referred by the Ld. counsel: 1. ITO v. Veeda Clinical Research Pvt. Ltd. (ITA No. 1406/Ahd/2009) The Tribunal held that unless there is a transfer of technology involved in provision of technical services extended by the UK company, the ‘make available’ clause is not satisfied and accordingly the income cannot be brought to tax under article 13(4) of the DTAA. 2. DCIT v. Boston Consulting Group Pte. Ltd. 94 ITD 31 (Mum) It is held that payment for services which are non-technical in nature, or, in other words, payments for services not containing any technology, are required to be treated as outside the scope of ‘fees for technical services’. 3. Exxon Mobil Company India Pvt. Ltd. v. ACIT 92 taxmann.com 5 (Mum) The Tribunal on a perusal of the agreement between the parties noted that as per the terms of the agreement, the Singapore company would provide management consulting, functional advice, administrative, technical, professional and other support services to the assessee but there was nothing in the agreement to conclude that in the course of such provision of service, the Singapore company had made available any technical knowledge experience, skill, knowhow, or process which enabled the assessee to apply the technology contained therein on its own without the aid of the Singapore company. 4. DCIT v. Hyva Holdings BV 106 taxmann.com 24 (Mum) The Tribunal held that the services did not make available any technical knowledge, skill, etc. since the Assessing Officer had failed to demonstrate through any material brought on record that while rendering services, the assessee has made available any technical knowledge, experience, know-how, skill, etc. enabling the recipient to apply such technology. 5. DDIT v. Tetra Pak India Pvt. Ltd. 111 taxmann.com 205 (Pune) The Tribunal held that the authorities below had not come to any finding that training imparted by associated enterprises to the employees of the assessee 20 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others made available any technology and in the absence of the same, payments made to the entities resident of countries of third category were not exigible to tax deduction at source. In the light of the above facts and findings, we do not find any infirmity in the direction of the DRP, therefore, this ground of appeal filed by the Revenue stand dismissed.” 7. No case has been made out that facts for present appeals in MWH UK Ltd. (Stantec UK) and MWH Consultants (S) Pte Ltd. i.e. in ITA No. 6619/M/2017, ITA No. 7881/Mum/2019 and ITA No. 2607/Mum/2017 are different, hence we follow the aforesaid precedent and decide the issue in favour of the assessee. 8. As regards the issue in other 10 appeals pertaining to MWH Global Inc (Mustang Acquisitions Holdings Inc.) and MWH Americas (Stantec Consulting Services. Inc.), the ld. DR has made out a case that the service agreements have not been produced. This submission has not been rebutted by the ld. Counsel of the assessee. Hence we deem it appropriate to accede to the request of the ld. DR and we restore these issues back to the file of the A.O. The assessee is to produce service agreements in respect of these entities before the A.O. who shall decide the same in accordance with the ratio emanating out of the order of the ITAT in the case of MWH Ltd. (Stantec UK) (supra). The consequential grounds shall accordingly follow. As regards the grounds of application of wrong tax rate and short credit of TDS, the same shall be examined by the AO as per law. 9. In the result, the appeals stand partly allowed as above. Order pronounced in the open court on 25.5.2022 Sd/- Sd/- (Rahul Chaudhary) (Shamim Yahya) Judicial Member Accountant Member Mumbai. Dated : 25.05.2022 Roshani, Sr. PS 21 I T A N o . 6 6 1 9 / M u m / 2 0 1 7 a n d o t h e r s MWH UK Ltd. and others Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai