M/S. CEVA FREIGHT LLC,NEW DELHI V. DDIT, NEW DELHI

ITA 1264/DEL/2014

AI Insights

CEVA Freight LLC, a US-based company, appealed against the order of the Deputy Director of Income Tax (DDIT) which taxed the administrative support services provided to its Indian affiliate, CEVA Freight India Pvt Ltd, as Fees for Included Services (FIS) under Article 12 of the India-US Tax Treaty. The Assessing Officer and the Dispute Resolution Panel (DRP) had both upheld the taxability, categorizing the services as managerial and/or consultancy in nature. The Tribunal, after considering the arguments and precedents cited by both parties, decided to remit the matter back to the Assessing Officer for a detailed examination of the nature of services provided, emphasizing the need to determine the exact nature of services for proper application of the tax treaty provisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708781 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2010-2011
• Other Referred Cases: Steria India Ltd. vs. CIT, Avtec Ltd vs. ACIT, Bio-Rad Laboratories (Singapore) Pte Ltd. vs. CIT, Shell India Markets vs. CIT, Invesco Holding Company (US) Inc vs. CIT, International Management Group (UK) Ltd. vs. CIT, H.J. Heinz Company vs. CIT
• Laws Referred To: Income-tax Act, 1961, India USA Tax Treaty
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIZAY B. VASANTA
• Assessee Lawyers: SALIL KAPOOR
• Keywords: Set aside; Transfer pricing; TDS; Double taxation relief
• Section: 143(3); 234B

Judgement Text

"ITA No. 1264/DEL/2014 [A.Y. 2010-11] CEVA Freight LLC Vs. The Dy. D.I.T Page 1 of 14 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1264/DEL/2014 [A.Y. 2010-11] CEVA Freight LLC Vs. The Dy. D.I.T 15350, Vickery Drive Circle – 1(1) Houston, Texas 77032 USA International Taxation ***** New Delhi KPMG, DLF Building No. 10 8th Floor, Tower B, DLF Cyber City Phase – 2, Gurgaon. PAN – AAHCM 2797 C (Applicant) (Respondent) Assessee By : Shri Salil Kapoor, Adv Shri Anil Chachra, Adv Department By : Shri Vizay B. Vasanta, CIT-DR Date of Hearing : 22.04.2025 Date of Pronouncement : 18.07.2025 ORDER PER NAVEEN CHANDRA, A.M:- ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 2 of 14 This appeal by the assessee is preferred against the order dated 17.12.2013 framed u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. 2. The assessee has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in taxing, and Hon'ble DRP has erred in confirming to tax, consideration for administrative support functions of Rs. 6,58,25,207 received by appellant from CEVA Freight India Pvt Ltd (\"India affiliate\" or \"CEVA India\") as Fees for Included services (\"FTS/ FIS\"), under Article 12 of India USA Tax Treaty (\"Tax Treaty\") by not appreciating: • that such functions do not 'make available' any technical knowledge, skills, expertise etc to the India affiliate; • judicial precedents relied upon by the appellate, inter alia, wherein similar functions were held not to 'make available' any technical knowledge, skills etc to the recipient. 2. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in making and the Hon'ble DRP has erred in confirming addition of tax deducted at source (\"TDS\") of Rs. 69,51,134, deducted by India affiliate while making payment of administrative support fee, on account of grossing up of such fee by not appreciating that such fee was actually paid 'gross of tax' to the appellate and the India affiliate was not liable to pay any amount over ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 3 of 14 and above administrative support fee of Rs. 6,58,25,207 (inclusive of TDS of Rs. 69,51,134). 3. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in levying and Hon'ble DRP has erred in confirming levy of interest under section 234B of the Act disregarding that even if consideration is treated as FTS/FIS, interest under section 234B is not applicable on facts and in law since: • The entire income of appellate, being a non-resident, was subject to tax deduction at source and tax was actually deducted by India affiliate, therefore, interest under section 234B of the Act is not applicable 4. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty for furnishing inaccurate particulars of income. The Appellant prays for leave to add, alter, rescind from or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal.” 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 4 of 14 4. Briefly stated, the facts of the case are that the assessee is a company incorporated under the laws of USA. It is engaged in the business of providing transportation, logistics and supply chain solutions and provides non-technical day to day administrative support functions. It has entered into an Administrative Support Agreement with CEVA Freight India Private Limited, \"CEVA”, the assessee, on 01.04.2005 to provide day to day administrative support. 5. The assessee e-filed its return of income for the A.Y under consideration declaring NIL income on 12.12.2010. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued to the assessee. In response to various notices and letters, the CA of the assessee appeared as and filed the requisite information and details. 6. During the course of assessment proceedings, the assessee was asked to explain in detail the nature of 'administrative support services' rendered to the assessee during the year, the procedure of rendering such services and the details regarding employees visiting India or employees visiting abroad for such services. Further, the assessee was also asked to furnish copies of e-mails and communications, copies of bills raised, copies of ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 5 of 14 accounts regarding such services and transfer pricing documentation for the relevant period. 7. In response, the assessee filed reply on 18.01.2013 explaining the nature of administrative support services and contended that the functions performed in relation to the services could not be said to 'make available' any technical knowledge, experience, skill, etc. to the Indian affiliate. 8. After carefully considering the assessee's reply and examining the facts of the case, the definition of \"Fee for Technical Services\"(FTS), the Assessing Officer relied on Explanation 2 to section 9(1)(vii) of the Act and observed that the definition of FTS in Explanation 2 to section 9(1)(vii) of the Act shows that consideration paid for the rendering of any managerial, technical or consultancy service, as also the consideration paid for the provision of services of technical or other personnel, would be regarded as fees paid for \"technical service\". The definition excludes from its ambit consideration paid for construction, assembly, or mining or like project undertaken by the recipient, as also consideration which would constitute income of the recipient chargeable under the head \"Salaries\". ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 6 of 14 9. The Assessing Officer was of the view that the assessee has provided support services to its Indian affiliate, which are clearly in the nature of managerial and/or consulting services, accordingly, categorically held that the assessee's receipts constitute FTS under section 9(1)(vii) of the Act. Accordingly, FTS was computed at Rs. 6,58,25,207/-. 10. Aggrieved, the assessee went in appeal before the DRP who upheld the findings of the Assessing Officer by holding that the assessee is providing support services and facilitate worldwide network connectivity to Indian entity on long term basis so that it can carry out the business functions in more efficient manner. However, in the instant case of the assessee, the nature of services rendered are on long term basis rather than for a limited duration and are of the category of consultancy in nature rather than purely technical in nature. In view of above, it is evident that services provided by the assessee are to be considered as having been made available to the recipient of service. Thus, the panel is of the opinion that necessary ingredient for application of Article 12(4)(b) is also satisfied. 11. Now the assessee is in appeal before us. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 7 of 14 12. The ld. counsel for the assessee submitted that services have been rendered as Managerial services and the same will be out of purview from taxation as per USA- India DTAA. In para 6.2 the Assessing Officer has given categorical finding that services have been rendered. The support services like Information system, legal services, accounting services etc. is in the nature of Managerial services. Reliance is placed on the Hon'ble Delhi High Court ruling in the case of Steria India Ltd. 386 ITR 390 [Delhi] wherein, the Court accepts the same view in the para 3 of its order and held in para 19 that fees for included services in Article 13(4) of the Indo-UK DTAA clearly excludes managerial services. Once the expression managerial services is out the taxability under the treaty does not arises. 13. The ld. counsel for the assessee further submitted that the above ruling was relating to India-UK treaty which is Pari Materia with the India- USA treaty. The same facts will apply in the assessee's case. The ld AR submitted that the above facts have been accepted by this Hon'ble Bench in Avtec Ltd v ACIT [2024] 168 Taxmann.com 692 in Para 50 & 52 of Order. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 8 of 14 14. The ld. counsel for the assessee continued by saying that Make available conditions are not fulfilled under India USA-DTAA and services are rendered on year-to-year basis and if the services are rendered on year-to- year basis means that make available condition is not fulfilled. Reliance is placed on the Bio-Rad Laboratories (Singapore) Pte Ltd. [2023] 459 ITR 5 [Delhi)-Para 14. The ld. counsel for the assessee submitted that the agreement is effective from 1-1-2010 and the assessee is in A.Y. 2018-19 and 2019-20 and if the assessee had enabled the services recipient to apply the technology on its own, then why would the service receipt require such service year after year since 2010. In assessee's case as well the agreement was entered in 2005 and services are rendered on year-to-year basis means the make available condition is not fulfilled and not taxable on under the Act. The above ruling has been followed by Hon'ble Bombay High Court in Shell India Markets [2014] 160 Taxmann 175 (Bom) in para 23 as stated supra that in case of continuity of services means, make available is not fulfilled. The ld. counsel for the assessee relied on the ITAT- Delhi in the case of Invesco Holding Company (US) Inc [2024] 165 Taxmann 330 [Delhi] which followed the Bio- Rad . Reliance was also placed on the Hon'ble Delhi ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 9 of 14 High Court in the case of International Management Group (UK) Ltd. v CIT [2024] 466 ITR 514 (Delhi). 15. The ld. counsel for the assessee emphasized that Administrative support services provided by the assessee to its Indian subsidiaries as support services to run their business effectively could not be considered as FTS. For this proposition, reliance is placed on the Mumbai Tribunal in the case of JEFFERIES LLC [2024] 164 Taxmann.com 468 (Mum-Tri). 16. The ld. counsel for the assessee also relied on case of CEVA Freight India Pvt. Ltd [Service Recipient] ITA no 1527/D/2011 [Delhi-Tri] Para 33 wherein it has held that the services are not made available to the assessee. In view of this finding, the amount paid by the assessee, is also not chargeable under the Article 12 of the DTAA. The Hon'ble ITAT has held in favour of the assessee that no TDS was required to be deducted as the same is not FTS. The ld AR reiterated that services are provided on year- to-year basis and make available condition under the India-USA DTAA is not fulfilled. The support services are in the nature of managerial services and the word managerial is missing in India -USA DTAA and hence not taxable. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 10 of 14 Mere use of technology does not mean that technology has been transferred. Support services are provided to run the business effectively does not lead to fulfillment of make-available condition. Group companies' cases are in favour of the assessee that services do not fulfill the make available conditions. In view of the above submissions, the ld. counsel for the assessee concluded that the services are not taxable under the India USA DTAA due to non-fulfillment of make available. 17. Per contra, the ld. DR argued that the assessee has nowhere challenged the nature of services as determined by the Assessing Officer or DRP. It is the say of the ld. DR that the services extended by the assessee per se is technical and/or consultancy. The ld. DR emphasized on the finding of the Assessing Officer that the assessee neither described how the services were rendered nor details of employees providing services were supplied. The ld. DR pointed out to the order of the Assessing Officer where the Assessing Officer has sought details of emails exchanged between the parties, to determine the nature of services which the assessee never furnished. The ld. DR relied upon the decision of the co- ordinate bench in the case of H.J. Heinz Company 108 taxmann.com 473 ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 11 of 14 for the proposition that where emails are not supplied, the Assessing Officer cannot determine the nature of services rendered and, therefore, the matter was remitted back to the Assessing Officer. 18. The ld. DR further distinguished the reliance placed by the ld. counsel for the assessee on the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Steria India Ltd 386 ITR 390 by arguing that the services rendered in the case of Steria India Ltd is distinguishable with the services rendered in the case of the Assessing Officer. The ld. DR continued by saying that in the case of the assessee, the services rendered are in the nature of technical and consultancy and not managerial. Further, the ld. DR submitted that in the case of Steria India Ltd, the issue was nature of services in context with India-France DTAA where no “make available” clause existed. However, the ruling in the case of Steria Limited [supra] is pari materia with the India–USA treaty. The ld. DR further pointed out that the issue on FMN has been decided against the assessee in the case of Nestle and therefore, reliance placed on the case of Steria would not be of any help to the assessee. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 12 of 14 19. We have heard the rival submissions and have perused the relevant material on record. We find that the nature of serviced provided to the assessee have been broadly described in the Master Agreement of 2005. We are of the considered opinion, however, that the actual nature of services rendered can only be ascertained from the facts of the case for each year. The nature of services may differ from year to year and, therefore, we have to examine the nature of services of the impugned year to determine whether “make available” clause is satisfied or not. 20. We find that the Assessing Officer tried to ascertain the exact nature of services that were rendered in this year and sought details, such as, emails exchanged between the parties on the issue of services and the same was not supplied by the assessee. We are, therefore, of the considered opinion that unless the nature of services is factually determined, we would not be in a position to ascertain whether the services were managerial or technical or consultancy or mixture of all. Once the nature of services is finally determined, we would be in a position to apply the provisions in the India-US DTAA treaty. We find that the Assessing Officer has taken the services as managerial and/or consultancy ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 13 of 14 services whereas the US treaty does not have managerial services as FTS but it contains consultancy services which can be treated as FTS. We are of the view that unless the basic facts are ascertained, we cannot proceed further on the issue of whether the services were FTS as per the DTAA treaty and “make available” clause is satisfied. We therefore, following the decision of H.J. Heinz Company (supra), find it expedient to remit the matter back to the file of the Assessing Officer to determine the exact and factual nature of services rendered. The assessee is directed to cooperate with the department and furnish all information sought to determine the nature of services. We, accordingly, set aside the issue of services rendered as FTS to the file of the Assessing Officer. Grounds raised by the assessee are allowed for statistical purposes. 21. In the result, the appeal of the assessee in ITA No. 1264/DEL/2014 is allowed for statistical purposes. The order is pronounced in the open court on 18.07.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18th July, 2024. ITA No. 1264/DEL/2014(AY 2010-11) M/s CEVA Freight LLC Vs DDIT Page 14 of 14 VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order .04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member .04.2025 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "