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

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.

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.

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.

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 Page 4 of 14 accounts regarding such services and transfer pricing documentation for the relevant period.

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.

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".

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.

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.

Now the assessee is in appeal before us.

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.

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.

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

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).

The ld. counsel for the assessee also relied on case of CEVA Freight India Pvt. Ltd [Service Recipient] [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.

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

Page 10 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.

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.

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.

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.