MYNTRA INC.,UNITED STATES OF AMERICA V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(2)(1), INTERNATIONAL TAXATION, NEW DELHI

ITA 3770/DEL/2023

AI Insights

Myntra Inc., a US-based company, appealed against the Assessment Order for the Assessment Year 2021-22, which classified certain receipts from Flipkart and PhonePe as Fee for Technical Services (FTS) under the Income Tax Act and the India-US DTAA. The primary contention was whether the services provided constituted FTS, which requires the 'make available' condition to be satisfied. The Tribunal examined the nature of services provided to Flipkart and PhonePe and the corresponding agreements. It was concluded that the services to Flipkart did not satisfy the 'make available' condition, leading to the allowance of those grounds of appeal. However, the issue related to PhonePe was remanded for further examination due to inconsistencies in the assessee's submissions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791716 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 21-12-2023
• Other Referred Cases: International Management Group (UK) Ltd. vs. CIT, GE Energy Management Services Inc. vs. ADIT, DIT vs. AP Moller Maersk AS, PCIT vs. Boeing India P. Ltd.
• Laws Referred To: Income Tax Act, 1961, India-US Double Taxation Avoidance Agreement
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJULA JAIN; VIKRAM SINGH SHARMA
• Assessee Lawyers: SACHIT JOLLY
• Keywords: TDS; Double taxation relief
• Section: 143(3); 234B

Judgement Text

"आयकर अपीलीय अधिकरण धिल्ली पीठ “डी”, धिल्ली श्री विकास अिस्थी, न्याविक सदस्य एिं श्री निीन चंद्रा, लेखाकार सदस्य क े समक्ष IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER& SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER आअसं.3770/धिल्ली/2023(नि.व. 2021-22) ITA No.3770/DEL/2023 (A.Y.2021-22) Myntra Inc. 8201, 164th Ave Ne, Suited 200, Redmond, WA 98052, United States of America, 98052 ...... अपीलार्थी/Appellant PAN AALCM-3409-K बिाम Vs. Assistant Commissioner of Income Tax, Circle International Tax 2(2)(1), Civic Centre, Minto Road, New Delhi 110002 .....प्रनिवादी/Respondent अपीलार्थी द्वारा/ Appellant by : Shri Sachit Jolly, Sr. Advocate with Ms. Rashi Khanna, Advocate प्रधिवािीद्वारा/Respondent by : Ms. Anjula Jain, CIT (DR) & Shri Vikram Singh Sharma, Sr. DR सुिवाई की निथर्थ/ Date of hearing : 12/09/2025 घोषणा की निथर्थ/ Date of pronouncement : 10/12/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the Assessment Order passed u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’) dated 16.10.2023, for Assessment Year 2021-22. 2. Shri Sachit Jolly, Sr. Advocate appearing on behalf of the assessee at the outset submitted that on instructions from the assessee/appellant he is not Printed from counselvise.com 2 ITA No.3770/DEL/2023 (A.Y.2021-22) pressing ground no. 2 of appeal, assailing validity of the Dispute Resolution Panel (DRP) directions sans DIN. In light of the statement made by ld. Counsel for the assessee at Bar, ground of appeal no. 2 is dismissed as not pressed. 3. The ld. Counsel submits that the two primary issues in the appeal are: (i) The Assessing Officer (AO) has erred in making addition of Rs.24,72,38,630/- in respect of receipts from Flipkart Internet P. Ltd. (in short ‘Flipkart’) on account of man power support services holding it as Fee for Technical Services (FTS) u/s.9(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and under Article 12(4) of India-US Double Taxation Avoidance Agreement (DTAA). (ii) The AO has erred in making addition of Rs.5,22,61,934/- in respect of receipts from PhonePe P. Ltd. (in short PhonePe’) on account of reimbursement of costs holding it as FTS u/s.9(1)(vii) of the Act and under Article 12(4) of India-US Double Taxation Avoidance Agreement (DTAA). 4. Narrating facts of the case, the ld. Counsel submits that the assessee is a company incorporated in the United States of America (USA). During the period relevant to assessment year under appeal, the assessee provided manpower support services to Flipkart. The services are rendered to Flipkart on year on year basis, the assessee is not making available any technical knowledge, experience, skill, knowhow or processes and there is no transfer of any technical plan or technical design to Flipkart. The services are rendered under service agreement dated 08.03.2021 effective from 1st April, 2020. The said agreement is at page no. 143 to 150 of the paper book. Referring to Annexure -A to the said agreement at page 149 of the paper book that defines scope of work, the ld. Counsel submits Printed from counselvise.com 3 ITA No.3770/DEL/2023 (A.Y.2021-22) that a perusal of scope of services would show that the assessee is only providing man power support services that includes: - 1. Developing natural language understanding technologies using state of the art Deep Learning techniques, Chat Bots, Knowledge graphs and Computer Vision; 2. Collaborate with academic institutions in the US; 3. Publish papers in leading conferences; & 4. Create Intellectual Property (Patents, Trade Secrets). 5. The ld. Counsel submits that the payments received for aforementioned services do not fall within the meaning of FTS as defined under Article 12 of India- US DTAA. He further pointed that in India-US DTAA ‘make available’ condition is required to be satisfied which is conspicuously missing in the instant case. Referring to para 6 of the Draft Assessment Order, the ld. Counsel contends that the AO has erred in recording that the assessee has made submissions that the assessee is assisting the Indian company by providing guidelines on commercial strategy and assisting in developing local commercial strategies. The assessee never made such submissions it is perhaps AO’s own understanding of the service agreement. He further pointed that the DRP has erred in holding that the consultancy service given by the assessee to Flipkart help Flipkart in studying consumer behavior and creating a data base of choices of customers leading to better targeting of customers in future. The assessee is only providing data, analyses of data is done by Flipkart. The assessee does not share information as to how the data is collected. Thus, ‘make available’ condition is not satisfied. The ld. Counsel further contended that there is no finding by the AO or the DRP that the assessee is transferring any technology to create data. In absence of any technology, skill, knowledge or knowhow transfer, the ‘make available’ condition is not satisfied. The ld. Counsel in support of his argument that mere rendition of Printed from counselvise.com 4 ITA No.3770/DEL/2023 (A.Y.2021-22) technical services does not constitute FTS unless technical skill, knowledge or knowhow is ‘made available’, placed reliance on the following decisions: i. International Management Group (UK) Ltd.vs. CIT, 466 ITR 514 (Del.); & ii. GE Energy Management Services Inc. vs. ADIT, 193 ITD 485 (Del-Trib.). The ld. Counsel further referred to the sample invoice at page 167 of the paper book to show that Flipkart has been invoiced only for providing support services for the period April 2020 to February 2021. 6. In respect of reimbursements from PhonePe, the ld. Counsel for the asssesee submits that the assessee had entered into cost reimbursement agreement with PhonePe for providing manpower services. As per the agreement dated 01.04.2018 (at pages 151 to 156 of the paper book) PhonePe identifies the person who has requisite expertise and skill to perform the scope of work described in the agreement. Thereafter, PhonePe request the assessee to provide employment to such identified person. The said employees are on the rolls of the assessee, the employees are stationed in US and the services are rendered in US. PhonePe reimburses salary of the employee to the assessee for the services rendered. There is no secondment of employees by the assessee to PhonePe. The AO and the DRP have proceeded on wrong assumption of facts that the assessee seconded its employees to PhonePe. The assessee recovers salary charges from PhonePe without any mark-up. The ld. Counsel further contended that where the payments are in the nature of reimbursements of cost, the same cannot be taxed as FTS. In support of his argument, the ld. Counsel placed reliance on the following decisions. i. DIT vs. AP Moller Maersk AS (2017) 5 SSC 651 (SC);& ii. PCIT vs. Boeing India P. Ltd., 457 ITR 84 (Del.). Printed from counselvise.com 5 ITA No.3770/DEL/2023 (A.Y.2021-22) 7. Per contra, Ms. Anjula Jain, representing the department vehemently supported the Assessment Order and Directions of the DRP. The ld. DR reiterating findings of the Assessing Officer prayed for dismissing appeal of the assessee. 8. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also considered the decisions on which ld. Counsel for the assessee has placed reliance in support of his submissions. 9. In ground of appeal no. 3 & 4, the assessee has assailed addition of Rs.24,72,38,630/- i.e. the amount received from Flipkart for provision of manpower support services. The assessee has claimed the receipts as exempt from tax under India-US DTAA, whereas, the AO has held said receipts in the nature of FTS, taxable u/s.9(1)(vii) of the Act as well as Article 12(4) of India-US DTAA. The assessee is engaged in providing business support services including manpower support services. The assessee entered into service agreement with Flipkart for providing following services: 1. Developing natural language understanding technologies using state of the art Deep Learning techniques, Chat Bots, Knowledge graphs and Computer Vision; 2. Collaborate with academic institutions in the US; 3. Publish papers in leading conferences; & 4. Create Intellectual Property (Patents, Trade Secrets). For providing above services, the assessee charge actual cost-plus mark-up of 10% on the cost. 10. The Assessing Officer has held that the payments for providing the aforesaid services are in the nature of FTS as the assessee is disseminating its Printed from counselvise.com 6 ITA No.3770/DEL/2023 (A.Y.2021-22) experience, knowhow and expertise in the field of business activity which capacitates the recipient of services perform better and enrich its business. Since, the assessee also facilitates to collaborate with academic institution in US as per the requirement of Indian entity, therefore, the services provided by the assesses also satisfies make available clause. The manpower support services provided by the assessee to the Flipkart as detailed above nowhere reflects transfer of any knowhow, technical skill, technical knowledge or process or transfer of any technical plan or design so as to satisfy ‘make available’ condition in Article 12(4)(b) of India-US DTAA. According to the AO ‘make available’ condition is satisfied as the assessee facilitates to collaborate with academic institution in US. The understanding of the AO with respect to ‘make available’ condition is erroneous. There is no finding by the AO or the DRP that the assessee is transferring any technology/knowhow, skill/experience or process or in any manner transfer technical plan or technical design so as to constitute any services for which payments fall within the meaning of FTS. The India-US DTAA Article 12(4) defines Fee for Included Services (FIS). The same reads as under:- “4. For purposes of this Article, \"fees for included services\" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design.” As per the AO, case of assessee falls in clause (b). To fall within the scope of Clause (b) of Article 12(4) the mandatory condition is that such services should ‘make available’ technical knowledge, experience, skill, knowhow or processes, or Printed from counselvise.com 7 ITA No.3770/DEL/2023 (A.Y.2021-22) consist of the development and transfer of technical plan or technical design. In our considered view, the condition as envisaged under Article 12(4)(b) of India-US DTAA is not satisfied in the instant case. 11. The Hon’ble Delhi High Court in the case of International Management Group (UK) Ltd. vs. CIT (supra) has held that make available condition would be satisfied only if rendering of services involves clear and demonstrable transfer of technical skill, expertise or knowhow to the recipients. The relevant observations of the Hon’ble Jurisdictional High Court on this issue are as under: “93. As we read Article 13(4)(c) of the DTAA, it becomes manifest that the mere furnishing of service would not suffice and a liability of tax would be triggered only if the technical or consultancy service were coupled with a transfer of the expertise itself. The expression \"make available\" must be construed as an enablement, conferral of knowledge and which would lead to the payer becoming skilled to perform those functions independently. The make available condition would be satisfied if the services rendered entails equipping the recipient with skill and evidencing an apparent conferment, alienation or transfer of skill, knowledge or know-how. This transfer of knowledge or skill is a pivotal factor in determining whether the consideration received can be classified as FTS. The ―make available‖ stipulation ensures that only those services that impart lasting technical benefits are classifiable as FTS. It was on a consideration of the aforesaid that this Court in Bio- Rad had held that the real test would be the transfer of technical knowledge, the knowledge and skills and expertise of the provider being absorbed by the payer and who would then have the capability to deploy that knowledge or skill without reference to the original provider. This reinforces our view that the make available condition would be satisfied only if the rendering of service involves a clear and demonstrable transfer of technical skills, expertise or know- how to the recipient. It must involve a transfer of capabilities and not just the temporary use of the provider's knowledge, expertise or skill. 94. This leads us to the definitive conclusion that the rendering of technical and consultancy services has to be read alongside and in conjunction with \"make available\" as that phrase appears in the aforesaid paragraph. On a plain textual reading of Article 13 it becomes apparent that both the rendering of service and the skill, knowledge and expertise being made available are conditions which must be concurrently and cumulatively satisfied. What we seek to emphasize is that Article 13 in unambiguous terms creates an enduring, unfading and imperishable link between the furnishing of service and a transmission or conferment of technical expertise, knowledge and skill. Printed from counselvise.com 8 ITA No.3770/DEL/2023 (A.Y.2021-22) 95. It is also important to bear in mind that the mere usage or utilisation of technical or consultative material in aid of business would not be sufficient to attract Article 13 of the DTAA. If we were to accept the submission that handing over of research or advisory work were sufficient for the purposes of Article 13, it would render the \"make available\" condition comprised in Para 4 (c) wholly redundant and otiose since the mere rendering of service would have sufficed. As De Beers correctly holds \"The tax is not dependent on the use of technology by the recipient.\" The make available prescription bids us to make a conscious distinction between a mere service provision and the impartation of lasting expertise. The offer of service or advise does not fundamentally alter the recipient's capabilities. These services, while potentially valuable, do not endow the recipient with new skills or knowledge which could be independently deployed in the future. The kernel of ―make available must therefore be recognised to be a transfer of technology or skills rather than a temporary reliance on external support.” [Emphasised by us] 12. Merely, for the reason that the assessee plays some role in collaborating with academic institutions in the US does not per se establish that the assessee is ‘making available’ any knowhow, technical knowledge or skill. Thus, in light of facts of the instant case and the decision of Hon’ble Jurisdictional High Court (supra), we find merit in ground of appeal no. 3 & 4 of assessee’s appeal, hence, the same are allowed. 13. In ground of appeal no. 5 to 7, the assessee has assailed addition of Rs.5,22,61,934/- on account of reimbursement of costs by PhonePe, holding it to be FTS u/s.9(1)(vii) of the Act and under Article 12(4) of the DTAA. The ld. Counsel for the assessee has contended that the authorities below have erred in holding that the transaction is in respect of secondment of employees by the assessee to Phonepe. As per the submissions of the ld. Counsel for the assessee, the said findings of the DRP and the AO are based on wrong assumption of facts. However, we find that stand of the assessee before the AO and the DRP in respect of payments received from Phonepe is that the payments are in respect of secondment of employees to Phonepe. This is evident from the submissions made Printed from counselvise.com 9 ITA No.3770/DEL/2023 (A.Y.2021-22) by the assessee before the AO dated 16.12.2022 at page no. 188 to 197 of the paper book. In said submissions, the assessee has also claimed that provisions of withholding tax u/s.192 of the Act have also been compiled at the time of remitting the monthly salary. However, no supporting document was furnished to this effect. The assessee for the first time has raised the argument before the Tribunal that it is not a case of secondment of employees and the services have been rendered by the employees based in US. The only document that has been furnished by the assessee in this regard is Cost Reimbursement Agreement (at page 151 of the paper book) between the assessee and Phonepe. The facts on this issue are not clear as the assessee has taken different stand before the Tribunal and the Lower Authorities. Therefore, we deem it appropriate to restore this issue back to the file of AO for denovo adjudication after ascertaining the facts from the documents and submissions of the assessee. Needless, to say that while deciding the issue afresh, the AO shall grant reasonable opportunity of making submissions to the assessee, in accordance with law. In the result, grounds of appeal no. 5 to 7 are allowed for statistical purpose. 14. In ground of appeal no. 8, the assessee has raised an alternate contention to ground no. 3 to 7. Since, the ground no. 3 & 4 have been decided in favour of the assessee and grounds of appeal no. 5 to 7 have been allowed for statistical purpose, the ground of appeal no. 8 has become academic. 15. In ground of appeal no. 9, the assessee has assailed charging of interest u/s.234A and 234B of the Act. Charging interest under aforesaid sections is mandatory and consequential, hence, the said ground is dismissed. Printed from counselvise.com 10 ITA No.3770/DEL/2023 (A.Y.2021-22) 16. In ground no. 10 of appeal, the assessee has assailed charging of interest Rs.13,84,224/- without specifying the provisions of the Act under which said interest is charge. This issue is restore back to the AO for re-examination and to specify under what provisions of the Act said interest has been charged or to delete the interest if the same is charged wrongly. 17. In ground of appeal no. 11 & 12, the assessee has alleged that the AO has failed to grant credit of TDS. The AO is directed to examine the issue and grant TDS credit, in accordance with law. Accordingly, ground of appeal no. 10 to 12 are allowed for statistical purpose. 18. In ground no 13 of appeal, the assessee has assailed initiation of penalty proceeding u/s.270A(1) of the Act. Challenge to penalty proceedings at this stage is premature, hence, ground no. 13 is dismissed. 19. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on Wednesday the 12th day of December, 2025. Sd/- Sd/- (NAVEEN CHANDRA) (VIKAS AWASTHY) लेखाकार सदस्य/ACCOUNTANT MEMBER न्यानयक सदस्य/JUDICIAL MEMBER धिल्ली/Delhi, ददिांक/Dated 10/12/2025 NV/- Printed from counselvise.com 11 ITA No.3770/DEL/2023 (A.Y.2021-22) प्रतिलिपि अग्रेपिि/Copy of the Order forwarded to : 1. अपीलार्थी/The Appellant , 2. प्रनिवादी/ The Respondent. 3. The PCIT 4. ववभागीय प्रनिनिथि, आय.अपी.अथि., वदल्ली/DR, ITAT, धिल्ली 5. गार्ड फाइल/Guard file. ORDER, //True Copy// (Asstt.Registrar)ITAT, DELHI Printed from counselvise.com 12 ITA No.3770/DEL/2023 (A.Y.2021-22) 1. Date of dictation of Tribunal order direct on computer 08.12.2025 2. Date on which typed draft order is placed before the dictating Member 09.12.2025 3 Date on which typed draft order is placed before the other Member (in the case of DB) 4. Date on which the approved draft order comes to P.S/Sr.P.S 5. Date on which the fair Order is placed before the dictating Member for sign 6. Date on which the fair Order is placed before the other Member for sign ( in the case of DB) 7. Date on which the Order comes back to P.S./Sr.P.S for uploading on ITAT website 8. Date of uploading, if not, reason for not uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which order goes for xerox 11. Date on which order goes for endorsement 12. Date on which the file goes to the Superintendent/O.S. for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to dispatch section for dispatch the Tribunal Order 15. Date of dispatch of order 16. Date on which file goes to Record Room after dispatch the order Printed from counselvise.com "