INTEVA PRODUCTS NETHERLANDS BV,NETHERLANDS vs. ACIT, CIRCLE- 2(1)(1), INTL. TAXATION, NEW DELHI

PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal has been filed by the assessee challenging the

final assessment order passed under Section 144C read with section

143(3) of the Income-Tax Act, 1961 pertaining to assessment year

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2014-15, in pursuance to the directions of the Dispute Resolution

Panel (DRP).

submitted that ground nos. 2, 3 and 4, being either consequential or

pre-mature at this stage, do not require adjudication. Thus, in view of

the aforesaid submissions of the assessee, the only surviving issue

arising for consideration is whether the amount received by the

assessee for providing business support services is in the nature of fees

for technical services (FTS) under Article 12(5) of the India-

Netherlands Double Taxation Avoidance Agreement (DTAA), hence,

taxable in India.

entity incorporated in Netherland and tax-resident of Netherland. For

the assessment year under dispute, the assessee filed its return of

income on 31.03.2016 declaring income of Rs.47,05,135.

noticed that in the year under consideration, assessee had provided

business support services to its Indian group entity and received

payment of Rs.1,49,02,771. However, the amount received was not

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offered as income on the plea that it is in the nature of business profit

and in absence of a Permanent Establishment (PE) in India, it is not

chargeable to tax.

Officer was not convinced. He observed that the payment received by

the assessee will qualify as FTS, both under Section 9(1)(vii) of the

Act as well as under Indian-Netherlands DTAA as they are in the

active of management and consultancy services. Accordingly, he

brought to tax the amount at the hands of the assessee. Against the

draft assessment order, assessee raised objections before DRP.

However, learned DRP rejected the objection.

that the services rendered are in the nature of managerial services and

not technical or consultancy services.

DTAA, learned counsel submitted, the definition of FTS does not

include managerial services. Therefore, he submitted, it cannot be

treated as FTS under the DTAA.

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rendered are in the nature of consultancy services, however, the make

available condition has not been satisfied.

observations of the Assessing Officer and learned DRP.

available on record.

Officer has very clearly and categorically mentioned that assessee’s

employees never visited India for rendering any kind of services.

Whatever services rendered, were through

mail/correspondences/reports etc. From the facts available on record,

it is noticed, the services rendered by the assessee are as under:

i) Engineering Services (Application Engineering and Technical Support/CAD/CAM Design);

ii) Financial Administration Services, including Treasury;

iii) HR Services, including benefits and related services;

iv ) Environmental Health and Safety;

v ) IT Services;

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vi) Management Services;

vii) Marketing Services;

viii) Legal Services;

ix) Tax Services;

x ) Supply Chain Management Services, including purchasing logistics and procurement; &

xi ) Quality Management Services.

they are mostly in the nature of managerial services. Reading of

Article-12 (5) of India-Netherlands DTAA reveals that it does not

include managerial services within FTS. Therefore, the payment

received by the assessee cannot be treated as FTS under India-

Netherlands DTAA. Even, assuming for the sake of argument that

payment received for certain kind of services is in the nature of FTS,

however, the make available condition needs to be satisfied. Neither

the Assessing Officer nor learned DRP have established on record that

by rendering the services, the assessee has made available technical

knowledge, know-how, skill etc. to the recipient of services, which

would have enabled the recipient of such services to utilize it

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independently without the aid and assistance of the assessee. Thus, in

our view, the make available condition is not satisfied. Therefore, the

payment received cannot be treated as FTS under Article-12(5) of

India Netherlands DTAA. Hence, we are inclined to delete the

addition made by the Assessing Officer.