DCIT, Circle-1(2)(1) Int. Taxation, New Delhi V. Concentrix CVG Customer Management Group Inc., USA

ITA 723/DEL/2023

AI Insights

The case involves cross appeals by Concentrix CVG Customer Management Group Inc. and the ACIT (Intt. Taxation) 1(2)(1), New Delhi, concerning the assessment years 2018-19 and 2019-20. The primary issues revolved around the determination of the assessee's fixed place of permanent establishment in India, the existence of a Dependent Agent PE, the presence of a service PE, and the methodology of profit attribution to the PE. The Tribunal referenced previous decisions in the assessee's own cases for earlier assessment years, which had established precedents on these issues. The Tribunal's decision leaned heavily on the principles of judicial discipline and the binding precedential value of earlier judgments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 112726 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 09-08-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 15-03-2023
• Other Referred Cases: ITA no. 7727/Del/2017, ITA no. 7782/Del/2018, ITA no. 7924/Del/2018, ITA no. 1086/Del/2022, ITA no. 1281/Del/2022
• Laws Referred To: Double Taxation Avoidance Agreement between India and United States of America
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment

Judgement Text

1 ITA Nos. 667, 668, 723 & 724/Del/2023 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D ”: NEW DELHI BEFORE SHRI G.S. PANNU, PRESIDENT AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 667/DEL/2023 A.Y. 2018-19 & ITA No. 668/DEL/2023 A.Y. 2019-20 Concentrix CVG Customer Management Group Inc., 201, East Fourth Street, Cincinnati Ohio, United States, USA-45202 PAN- AACCC8989M Vs ACIT (Intt. Taxation) 1(2)(1), New Delhi. APPELLANT RESPONDENT AND ITA No. 723/DEL/2023 A.Y. 2018-19 & ITA No. 724/DEL/2023 A.Y. 2019-20 ACIT (Intt. Taxation) 1(2)(1), New Delhi. Vs Concentrix CVG Customer Management Group Inc., 201, East Fourth Street, Cincinnati Ohio, United States, USA-45202 PAN- AACCC8989M APPELLANT RESPONDENT Assessee represented by Shri Rishabh Malhotra, AR Department represented by Shri Vizay B. Vasanta, CIT(DR) Date of hearing 10.08.2023 Date of pronouncement 23.08.2023 2 ITA Nos. 667, 668, 723 & 724/Del/2023 O R D E R PER ANUBHAV SHARMA, JM: The assessee as well as the Revenue are in cross appeals against respective orders of the learned CIT(Appeals)-42, Delhi dated 13.10.2023 for A.Y. 2018-19 and 2019-20. All these appeals were heard together and are being disposed of by a common order for the sake of convenience. 2. The facts of the case are that assessee Concentrix CVG Customer Management Group Inc. (Formerly known as “Convergys Customer Management Group Inc.”) is a company incorporated in the United States of America (“USA”) and is a tax resident thereof. The Appellant provides information technology enabled customer management services by utilizing its advanced information system capabilities, human resource management skills and industry experience. Appellant has claimed to be entitled to the benefits of the Double Taxation Avoidance Agreement between India and United States of America (hereinafter referred to as “the DTAA”). Tax residency certificates were furnished during the course of the assessment proceedings and was accepted as such. The Appellant has a subsidiary in India by the name of Convergys India Services Private Limited (hereinafter referred to as ‘CIS’). To service its customers, the Appellant claims 3 ITA Nos. 667, 668, 723 & 724/Del/2023 that it procures services from India and does not carry out any operations in India. 3. Heard and perused the record. 4. Learned AR submitted that the issues raised in the appeals are covered in favour of the assessee by the findings of the Coordinate Bench in A.Y. 2013-14 in ITA no. 7727/Del/2017. 5. Learned DR could not rebut the submissions, however, submitted that each assessment is independent and relied on the order of Ld. AO. Ground nos. 1 & 2 of assessee’s appeals: 6. The issue arises out of determination of fixed place of permanent establishment of assessee in India and the issue has been considered in favour of assessee in A.Y. 2013-14 and further relied and followed in A.Y. 2014-15 in ITA no. 7782/Del/2018 and ITA no. 7924/Del/2018, order dated 11.01.2023 and for A.Y. 2017-18 (ITA no. 1086/Del/2022 and ITA no. 1281/Del/2022) order dated 6.3.2023, it would be appropriate to reproduce para 6.2 of the findings of Tribunal for A.Y. 2013-14, and following the same the issue is decided in favour of the assessee. “6.2 After duly considering the submissions of both the sides as well as the 4 ITA Nos. 667, 668, 723 & 724/Del/2023 impugned order, we are of the considered opinion that the Tribunal in assessee’s own case for Assessment Years 2006-07 and 2008-09 has reached the conclusion that there was a fixed place PE of the assessee in India and that profit attribution had to be made in the hands of the assessee due to such fixed place PE. Although, the assessee has approached the Hon’ble High Court against the said order of the Tribunal holding that the assessee had fixed place PE in India, the appeals are yet to be disposed of by the Hon’ble High Court. Thus, as of date, the order of the Coordinate Bench of the Tribunal for Assessment Years 2006-07 and 2008-09 have a binding precedential value for us because bound by judicial discipline, we are to follow the decisions of the Co-ordinate Bench, especially if the same have been rendered in assessee’s own case. The relevant observations and findings of the ITAT in assessee’s own case for Assessment Years 2006- 07and 2008-09 and contained in para 9.8 of the said order and the same are reproduced herein under for a ready reference:- “9.8 Looking at the entirety of facts and circumstances, we are of the view that the Ld. CIT(A)’s order on the proposition of PE deserves to be upheld. The employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed place of business at their disposal. CIS was practically the projection of assessee’s business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee has a fixed place PE in India under Article 5(1) of the DTAA is upheld.” 6.1 Accordingly, respectfully following the order of Coordinate Bench in assessee’s own case for AY 2013-14, the ground is decided against the assessee and the order of Ld. CIT(A) in holding that assessee has a fixed place PE in India is upheld. 5 ITA Nos. 667, 668, 723 & 724/Del/2023 Ground no. 1 of Department’s appeals: 7. The issue arises out of Dependent Agent PE in India, which has been decided in favour of assessee in A.Y. 2006-07 in assessee’s own case and which has been followed in A.Y. 2013-14, 2014-15 and 2017-18. In para 4.26 of the order for A.Y. 2006-07, relied in AY 2013-14, the Tribunal has made the finding as follows: “4.26. In the light of above, even assuming, CIS is not an agent of CMC, it does not have any authority to conclude contracts or secure orders on behalf of CMC and hence CMC does not have a Dependent Agent PE in India.” 7.1 In the absence of any thing to distinguish on facts or law, following the aforesaid, the ground is decide against Revenue. Ground no. 2 of Department’s appeals: 8. The issue arises out of service PE of assessee in India, where learned CIT(Appeals) has held that there was no service PE in India. The issue has been considered in favour of assessee in Coordinate Bench order for A.Y. 2013-14 and followed in A.Y. 2014-15 & 2017-18. It will be appropriate to reproduce para 7.0.1 in order for AY 2013-14, here as follows: 6 ITA Nos. 667, 668, 723 & 724/Del/2023 “7.0.1 We also note that the Ld. CIT (A) has returned a finding based on the order of the IT AT and has also noted that even in assessment year 2006-07, the Ld. CIT (A) had held that there was no service PE in India and that the AO had not challenged this before the ITAT. The findings of the Ld. CIT (A) are reproduced here in under for a ready reference:- “On the issue of service PE, AO has mentioned in the assessment order for AY 2013-14 that the Appellant is providing services to CIS and these services are not in the nature of fee for included services. In this regard, the appellant has submitted that, the personnel of the Company visited India for rendering services that qualify as Fee for Included Services under Article 12 of the DTAA and the company has accordingly offered such income to tax in its tax return. Even in the assessment order the Ld. AO has accepted the returned position and taxed the said amount as Fee for Included Services in terms of Article 12 of the DTAA. Even in AY 2006-07, the CIT(A) has held that there is no Service PE in India and the AO had not challenged this before ITAT. Accordingly, I hold that the Appellant does not have a Service PE under Article 5(2X1) of the DTAA. Accordingly, Ground no 5.12 is allowed.” 8.1 In the absence of any thing to distinguish on facts or law, following the aforesaid, the ground is decided against Revenue. Ground nos. 3 & 4 of assessee’s appeals; & Ground No. 3 of Department’s appeals: 9. The issue arises out of profit attribution methodology to the PE in India and in assessee’s own case for A.Y. 2006-07 and 2008-09 the issue has been considered in favour of the assessee and followed thereafter in A.Y. 2013-14, 2014-15 and 2017-18. The relevant findings in paras 6.0, 6.4 and 7.3 for A.Y. 2013-14 are reproduced below: 7 ITA Nos. 667, 668, 723 & 724/Del/2023 “6.0 ..... It has also been held by the ITAT in assessee’s own case for assessment year 2006-07 and 2008-09 as aforesaid that profits could be attributed on account of assets provided by the assesee to Convergys India Sendees Pvt. Ltd. .... .” “6.4 As far as the methodology of profit attribution is concerned, the Co- ordinate Bench in assessee’s own case for Assessment Years 2006-07 and 2008-09 has laid down the methodology in paragraphs 11.17 to 11.26 of the said order and respectfully following the same, the TPO is directed to adopt the same methodology as enumerated by the Co-ordinate Bench. Thus, the issue to attribution of profits is restored to the file of TPO for computing the attribution of profits with respect to the fixed place PE after giving due opportunities to the assessee to submit its computation and calculations. Thus, Ground Nos.3 & 4 in asscssee’s appeal and Ground N0.3 in Department's appeal stand allowed for statistical purposes.” “7.3 After this the only issue remaining to be adjudicated in the department’s appeal is the action of the Ld. CIT (A) in reducing the profit attribution done by the AO with respect to fixed place PE in India. As we have already restored the ground in assessee’s appeal challenging the finding regarding fixed place PE, the grounds relating to profit attribution in both the appeals also need to be restored to the AO/TPO with similar directions as contained in Para 6.0 above. It is so directed.” 9.1 In the absence of any thing to distinguish on facts or law, following the aforesaid, the ground stand allowed for statistical purposes. Ld. AO/TPO shall take note of the directions of Coordinate Bench in AY 2013-14, and follow the same in present AYs also. Ground No. 4 of Department’s appeals: 10. Issue arises out of taxability of link charges/IPLC as royalty and the issue is 8 ITA Nos. 667, 668, 723 & 724/Del/2023 covered in favour of the assessee wherein following the findings in favour of assessee for A.Y. 2006-07 the issue has been decided in favour of the assessee in A.Y. 2013-14, 2014-15 and 2017-18. Para 7.2 of the order for AY 2013-14 is reproduced here under: “7.2 Similarly, the issue of payment link charges/IPLC charges being taxable under royalty has been decided in assessee’s favour by the Tribunal in assessment year 2006-07 ' n Para 3.5 of the said order. The same is being reproduced here in under for a ready reference:- “3.5. In view of the foregoing observations we hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held, that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee.” 11. In the absence of any thing to distinguish on facts or law, following the aforesaid, the ground is decided against Revenue. 9 ITA Nos. 667, 668, 723 & 724/Del/2023 12. Consequently the appeals of assessee are allowed for statistical purposes and of Revenue allowed partly with consequences to follow the events as unfolded above. Order pronounced in open court on 23 rd August, 2023. Sd/- Sd/- (G.S. PANNU ) (ANUBHAV SHARMA) PRESIDENT JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI