INTERNATIONAL MANAGEMENT GROUP (UK) LIMITED vs. COMMISSIONER OF INCOME TAX-2, INTERNATIONAL TAXATION, NEW DELHI

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read into the provisions of Article 13(6) of India UK Tax Treaty? C. Whether the Income Tax Appellate Tribunal erred in law in not appreciating that for applying Article 13( 6) of the India UK Tax Treaty the effective connection is to be seen qua the contract and not the services/activities? D. Whether, the Income Tax Appellate Tribunal erred in not appreciating that taxability of entire revenue of Rs.23,97,37,894/- should be governed by Article 7 of the India UK Tax treaty and only the receipts amounting to Rs. 10,55,92, 156/attributable to the Service PE in India on the basis of FAR analysis duly accepted by TPO can be taxed in India? E. Whether, the Income Tax Appellate Tribunal erred in law in holding that the receipts of the Appellant Company satisfy the make available principle as per Article 13(4)(c) of India UK Tax Treaty and accordingly be taxed as Fees for Technical Services ('FTS')? F. Whether, the Income Tax Appellate Tribunal erred in law in not appreciating that the Article 5(2)(k) and Article 13(4)(c) of India UK Tax Treaty are mutually exclusive and in the case of admitted service PE the question of FTS does not arise? G. Whether the Income Tax Appellate Tribunal erred in law in not appreciating that source of income for BCCI from IPL 2009 event is outside India (United Arab Emirates) and accordingly, the payment made by BCCI to the Appellant Company falls under the exclusion clause as provided under section 9(1 )(vii)(b) of the Act?”

extract the following passages from the aforesaid decision:- “J. CONCLUSIONS

services relating to on ground implementation and running of the event was subcontracted to the IMC India, branch. The IMG India PE was involved in/responsible for overseeing and managing. The liasonsing and implementation support activities undertake taken by the IMC India branch. It is also important to note that how this functions were performed it was stated in the transfer pricing study report of the appellant that IMO UK employees came to India from time to time for short-term visits. Further few freelancers were appointed/engaged by IMO UK for undertaking the on- ground implementation and related supervision activities in India. As these functions performed, assessee has claimed that it has created a service PE in India and therefore the income should be chargeable to tax according to the article 7 of the Double Taxation Avoidance Agreement. Therefore according to us the above agreements and memorandum of understanding has two limb one. with respect to the performance of the activities performed by the permanent establishment in India and another limb deals with respect to the performance of the services by the IMG UK directly for which the India PE has nothing to do. Admittedly the issue is concerned with respect to the fees for technical services. It is also admitted position that while the effective connection of royalties with a permanent establishment has to be evaluated by applying the ‘assets test’, and for the purpose of fees for technical services the ‘activity test? or ‘functional test’ should be applied as held in case of Nippon Kaiji Kyokoi v. ITO, 47 SOT 41 (Mum). Therefore to “effectively connect’ the whole income with the PE, contending party i.e. assessee, should establish that PE is engaged in the performance of all those services or should be involved in actual rendering of such services, or (2) it should arise as a result of the activities of the PE, or (3) The PE should, at least, facilitate, assist or aid in performance of such service irrespective of the other activities PE performs. Therefore according to article 7, for attribution of the profits to the permanent establishment the activity carried out by the permanent establishment is important and to that extent only the profits can be attributed to that particular permanent establishment. However if there are other activities, which are also incorporated in the agreement, which are not at all carried on with the help of, or through, or by, or under the control, or under the supervision of the permanent establishment such activities and income arising there from cannot be said to be ‘effectively connected’ with the permanent establishment and article 7 cannot be applied to those services. In the present case certain activities are carried out by the appellant which are not even concerned This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 12:03:31

with the functioning of the permanent establishment therefore in our view only the activities which are performed by the permanent establishment are effectively connected with the permanent establishment and activities which are not carried on by the permanent establishment but are carried out by the head office of the appellant are not ‘effectively connected’ with the permanent establishment. We are also of the view that the term ‘effectively connected’ should not be understood to mean the opposite of ‘legally connected’ but rather something in the sense of ‘really connected’. Therefore the activities mentioned in the contract should be connected to the permanent establishment not only in the form but also in substance. It is also interesting to note that the permanent establishment of the assessee has been admitted by the appellant only because of the reason that some of the employees of the appellant came to India from time to time for short visit and further certain freelancers were appointed for undertaking the own ground implementation related supervision activities in India. Therefore according to us there are minimum activities performed by the PE of appellant in India. Hence just performing such minimum activities it cannot be said that whole of the revenue of Rs. 33 crores involved in the contract is ‘effectively connected’ with the activities of the permanent establishment in India. Hence we reject the contention of the assessee that the whole of the revenue involved in the contract should be considered as effectively connected with the permanent establishment of the appellant. We also give one more reason may be a hypothetical one which supports our view. Supposedly a contract of Rs. 100 crore is awarded to an overseas entity for rendering of the management services and if such : overseas entity establishes a permanent establishment by just deputing its staff for more than 90 days, it creates a service permanent establishment of that for an entity in India. On the basis of the minimum activities performed by that particular staff which is deputed in India 10% of the gross receipt say 10 crores is attributed to permanent establishment and after claiming deduction of expenses there from of say 60% of the income attributed, assessee offered balance amount as profit of the permanent establishment for taxation. In transfer pricing study report, based on FAR analysis such attribution of the profit is considered to be at arm's length by the assessee and as well as by the transfer pricing officer, it cannot be said that the balance sum of Rs. 90 crores be taxed in India as the whole contract was ‘effectively connected’ with the permanent establishment created by the petitioner of some staff for performing some of the activities and crossing the threshold duration. We do not subscribe to such a view and This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 12:03:31

we are also of the view that such is the case of the assessee before us.”