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Income Tax Appellate Tribunal, I BENCH MUMBAI
Before: SHRI SAKTIJIT DEY, HONBLE & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
These two appeals filed by Revenue are against the orders of CIT (A)-58, Mumbai, vide order nos. ITBA/APL/S/250/2024- 25/1065300510(1) and ITBA/APL/S/250/2024-25/1065298099(1), dated 31.05.2024 passed against the assessment order by Assistant Commissioner of Income Tax (IT)-4(3)(2), Mumbai, u/s. 147 r.w.s. 144C of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 25.05.2023, for Assessment Years 2014-15 and 2013-14, respectively. and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 2. Grounds taken by the Revenue are reproduced as under:
[A.Y. 2014-15] a) Whether on the facts and in the circumstances of the case the Hon'ble CIT(A) erred in dismissing the ground of appeal of the assessee in respect of support service income of Rs.4,35,32,305/- on the basis of his order bearing DIN No. ITBA/APL/250/2024-25/1065298808(1) dated 31.05.2024 in the appeal of the assessee for A.Y 2014-15 against the order u/s 143(3) of the Act, wherein the addition of Rs.4,35,32,305/- in respect of support service income received by the assessee was deleted without appreciating the fact that the service agreement of the assessee with its clients indicates that consultancy and technical services were being made available by the assessee to its clients ? b) Whether on the facts and in the circumstances of the case the Hon'ble CIT(A) erred in dismissing the ground of appeal of the assessee in respect of support service income of Rs.4,35,32,305/- on the basis of his order bearing DIN No. ITBA/APL/250/2024-25/1065298808(1) dated 31.05.2024 in the appeal of the assessee for A.Y 2014-15 against the order u/s 143(3) of the Act, wherein the addition of Rs.4,35,32,305/- in respect of support service income received by the assessee was deleted without appreciating the fact that the service rendered by the assessee to its clients was within the ambit of “make available” clause as required under the India US DTAA and hence in the nature of Fees for Technical services under the Act as well as under the India US DTAA ?
[A.Y. 2013-14] a) Whether on the facts and in the circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.1,96,64,542/- in respect of support service income received by the assessee without appreciating the fact that the service agreement of the assessee with its clients indicates that consultancy and technical services were being made available by the assessee to its clients ? b) Whether on the facts and in the circumstances of the case the Hon'ble CIT(A) erred in deleting the addition of Rs.1,96,64,542/- in respect of support service income received by the assessee without appreciating the fact that the service rendered by the assessee to its clients was within the ambit of “make available” clause as required under the India US DTAA and hence in the nature of Fees for Technical services under the Act as well as under the India US DTAA ?
2.1. Issues raised by the Revenue in both the appeals are common and therefore, we take up both the appeals together by passing this consolidated order. We first take up appeal for Assessment Year 2014- 15 in ITA No. 3794/Mum/2024. and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 3. Facts common to both the appeals are that assessee is headquartered in San Francisco, USA which is a diversified financial services company incorporated in the United States of America. It offers banking including online and mobile, home mortgage, loans and credit, investment and retirement, wealth management services and serves commercial, retail and institutional customers. It qualifies as a resident of USA as per Article 4 of India-USA Double Taxation Avoidance Agreement (DTAA) and holds a valid Tax Residency Certificate (TRC) issued by the Revenue authorities of USA. Assessee is a non-resident and has earned the below mentioned incomes during the year under consideration: i. Income attributable to the liaison office in India. ii. Interest income earned from borrowings. iii. Support service income received from Associated Enterprises (AEs).
For the appeal for AY 2014-15, it is noted that assessee filed its return of income on 24.11.2014 u/s.139(1), reporting total income at Rs. 27,63,21,888/-. Case was subjected to scrutiny assessment u/s. 143(3) r.w.s.144C(3), for which the order was passed on 08.02.2018. In the said assessment completed by the ld. Assessing Officer, additions were made on account of interest income of Rs. 1,52,55,900/- and on account of support service fee amounting to Rs. 4,35,32,302/-. For the additions so made, assessee moved an appeal before the ld. CIT(A) in appeal No. CIT(A)-58, Mumbai/10625/2017-18, for which the order was passed on 31.05.2024. During the pendency of this appeal, a notice u/s. 148 dated 30.03.2021 was issued. It is important to take note of the total income assessed in both the assessment proceedings, i.e., and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 order passed u/s. 143(3) r.w.s. 144C(3) and the reassessment order passed on 25.05.2023 u/s. 147 r.w.s. 144C(3) and 143(3):
I. Total income assessed u/s. 143(3) r.w.s.144C(3): Particulars Amount (Rs.) Amount (Rs.) Total Income as per RoI 27,63,21,885 Add: Income From Support Service 4,35,32,305 Add: Interest Income 1,52,55,900 5,87,88,205 Total Assessed Income 33,51,10,090 II. Income reassessed u/s. 147 r.w.s.144C(3) is tabulated below: It is important to note that the total income for the purpose of making addition has been taken as per the assessment order passed u/s. 143(3) r.w.s.144C(3) which is already tabulated above. Two further additions were made to the total income assessed u/s. 143(3) r.w.s.144C(3) in the reassessment proceedings resulting into total income reassessed at Rs.36,59,84,420/-. The details are tabulated below: Particulars Amount (Rs.) Gross Total Income as per assessment order under section 33,51,10,090 143(3) r.w.s. 144C(3), dated 08.02.2018 Add: Income attributable to the LO as disclosed in ROI filed 2,78,24,113 u/s 148 of the Act Add: Income attributable to the LO in India i.e. 20% of Rs 30,50,216 15,251,079 Total Income (rounded off as per Section 288A of the Act) 36,59,84,420 4.1. Since the additions made in the original assessment were carried into the reassessment made u/s. 147, assessee contested the additions made in the original assessment in the appeal filed before ld. CIT(A) for reassessment order passed u/s. 147. and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 4.2. In the appeal filed by the assessee against the original assessment made u/s. 143(3) r.w.s. 144C(3), ld. CIT(A) deleted the additions made in respect of income from service fee and interest income. Against the relief so granted by ld. CIT(A), department did not file second appeal before the Tribunal, resulting into attainment of finality to the income reported by the assessee in its return. Ld. CIT(A) on the said two issues, for which relief had already been granted in the appeal filed against original assessment, held that the said two issues have now become infructuous in the appeal filed against the reassessment order and thus, dismissed the grounds raised by the assessee on the said two issues, by holding it as infructuous. Revenue has come up in appeal before the Tribunal against such disposal of the two grounds by the ld. CIT(A) treating it as infructuous.
In the given set of facts where Revenue had not contested the relief granted by ld. CIT(A) on the two issues in appeal against the original assessment, both the issues had attained finality, which is an undisputed fact. Revenue has raised the grounds in respect of addition of Rs 4,35,32,305/- for support service income received by the assessee which has been deleted by the ld. CIT(A) treating it as infructuous. Since ld. CIT(A) relied on his own order in appeal against the original assessment, we find that Revenue has not contested the relief so granted against the original assessment and now through the reassessment proceedings, Revenue has raised up the issue on the relief so granted by ld. CIT(A).
5.1. In our considered view, ld. CIT(A) has rightly dealt with the issue and has held it to be infructuous since it was already settled in favour of the assessee while adjudicating on appeal against the original and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 assessment made u/s. 143(3) r.w.s. 144C(3). Accordingly, we do not find any reason to interfere with the finding arrived at by ld. CIT(A) in holding the ground raised as infructuous for which the Revenue is in appeal before us. Accordingly, grounds raised by the Revenue in its appeal for Assessment Year 2014-15 are dismissed.
Before parting, it is important to take note of the observations and findings of ld. CIT(A) while adjudicating on the issue of addition in respect of support service income made in the original assessment u/s. 143(3) r.w.s. 144C(3). These observations and findings of ld. CIT(A) while granting relief to the assessee against which Revenue did not contest the matter before the Tribunal have a direct bearing on the appeal of the Revenue for Assessment Year 2013-14 in which is also before us and is dealt in this order itself.
6.1. During the year under consideration, the assessee in its return had claimed income of Rs.4,35,32,305/- as exempt under India-USA DTAA. Ld. AO had examined the submission of the assessee. However, the same was not accepted who considered the services rendered by the assessee in the nature of fees for technical services as per the provisions of the Act and had taxed as per section 115A of the Act. In this regard, nature of services provided by the assessee as per the agreement are as under:
1. 1. Advise and assist the Client with respect of corporate accounting, finance, and tax matters in connection with the Client's business and operations.
2. Provide data processing and other operational support for the Client in connection with the Client's business and operations, and 3. Render further advice, reports, information, documentation and assistance as may be reasonably required by the client in connection with the operation of its business and operations.
6.2. Ld. Assessing Officer after analysing the service agreement concluded that the receipts fall within the ambit of ‘make available’ as required under the India-US DTAA and hence are in the nature of fees for technical services under the Act as well as under the India-US DTAA on account of following reasons: i. Services are of consultancy and technical in nature. ii. Services are rendered by the assessee who has an expert team of suitably skilled, qualified and experienced executives in such services. The said services are rendered to the technical persons of the recipient entity. iii. Rendering such services by an expert to an expert makes available technology to the recipient of the services who are able to apply the same on their own in future 6.3. Ld. Assessing Officer relied on the following decisions: i. Tecumseh Products (I) Ltd. vs. DCIT [2007] 13 SOT 489 (Hyd) ii. Steel Authority of India Ltd. vs ITO [2009] 120 TTJ 297 (Del) iii. GVK Industries Ltd vs. ITO [1997] 228 ITR 564 (AP)
6.4 Facts of the case and submission of the assessee were examined by the ld. CIT(A). He noted that assessee is a tax resident of USA Article 12(4) of the treaty between India-USA which defines fees for included services 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. 1. 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 and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 2. make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design”
6.5. Further, he took note of the MOU to the India-USA DTAA which explains the term 'FIS' and related terms such as make available and the same is reproduced as under: "Article 12 includes only certain technical and consultancy services. But technical services, we mean in this context services requiring expertise in a technology. By consultancy services, we mean in this context advisory services. The categories of technical and consultancy services are to some extent overlapping because a consultancy service could also be a technical service. However, the category of consultancy services also includes an advisory service, whether or not expertise in a technology is required to perform it Under paragraph 4, technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(a), if they are ancillary and subsidiary to the application or enjoyment of a right, property or information for which are royalty payment is made; or (2) as described in paragraph 4(b), if they make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design. Thus, under paragraph 4(b), consultancy services which are not of a technical nature cannot be included services"
6.6. The MOU also clarifies that typical categories of services that generally involve either making technology available or the development and transfer of technical plants or technical designs, or as described in paragraph 4(b), include:
1. 1. Engineering services (including the sub-categories of bio- engineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical, and industrial engineering).
2. Architectural services; and 3. Computer software development.
6.7. Under paragraph 4(b), technical and consultancy services could make technology available in a variety of settings, activities and and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 industries. Such services may, for examples, relate to any of the following areas:
1. 1. Bio-technical services.
2. Food processing.
3. Environmental and ecological services, 4. Communication through satellite or otherwise, 5. Energy conservation, 6. Exploration or exploitation of mineral oil or natural gas, 7. Geological surveys, 8. Scientific services, and 9. Technical training 6.8. Assessee on the basis of article 12(4)(b) of the India-USA treaty has submitted that the services provided by it do not qualify as FIS as per Article 12 of the tax treaty. Assessee has also mentioned that the assumption of the ld. Assessing Officer that the qualified staff which is advising and assisting the staff of its AEs in corporate accounting, tax matters, finance, data processing and other operations ought to be training the staff of its AEs is incorrect. Further, assessee contended that it has not imparted knowledge which enable the staff of AEs to perform the services independently.
6.9. From the service agreement of the assessee and after analysing the provisions of Article 12(4)(b) of the India-USA DTAA, ld. CIT(A) held that the services provided by the assessee to its AE do not come within the definition of FIS as per Article 12(4)(b) of the India-USA DTAA.
6.10. Ld. CIT(A) also dealt with the decision in the case of Tecumseh Products (I) Ltd. vs. DCIT (supra) and GVK Industries Ltd vs. ITO (supra) and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 relied upon by the ld. Assessing Officer. In these decisions, services in question were support services in relation to accounting, finance and taxation (in the case of Tecumseh Products) and financial advisory services (in the case of GVK Industries). In both these judicial precedents, assessee company did not opt or invoke provisions of the applicable tax treaties. Therefore, the issue before the ITAT and Supreme Court was to determine whether such services fell in the definition of fees for technical services as defined under section 9(1)(vii) of the Act. The ‘make available’ benefit specified in the treaty was not discussed at all and accordingly, it was held that these judicial precedents have no effect to the case of the assessee. Also, ld. AO in the assessment order has relied upon decision in the case of Steel Authority of India Ltd. vs. ITO (supra). However, ld. CIT(A) took note of the facts of this case which are completely distinguishable and observed that foreign company in this case provided training to the employees of the Indian company. Providing training to the employees indeed makes available the knowledge and therefore, was held to be as ‘FIS’. However, facts in the case of the assessee were held to be different.
6.11. Ld. CIT(A) thus held that case laws relied upon by the AO are not applicable to the case of the assessee since facts are distinguishable. Further, he took note of the factual position that ld. AO in the assessment order passed u/s,143(3) of the Act for A.Y.2011-12, had accepted the claim of the assessee that the services provided by it are exempt as per Article 12 of the India-USA DTAA.
6.12. Thus, in view of the facts of the case and decision of various Hon'ble High Courts/ITAT as referred above by the assessee, it was held that the services provided by the assessee cannot be considered as FIS and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 within the ambit of make available as required under India-USA DTAA and hence, not taxable under the India-USA DTAA. Accordingly, he allowed the ground of appeal.
7. With the above background of the observations and findings of ld. CIT(A) in appeal against original assessment, we now take up the appeal for Assessment Year 2013-14, wherein identical issue has been raised in respect of addition made on account of support service income amounting to Rs.1,96,64,542/-.
8. Assessee had filed its return of income on 29.01.2013 u/s. 139(1), reporting total income at Rs. 47,51,57,260/-. The said assessment was completed at assessed total income of Rs. 51,81,34,278/- vide order dated 27.02.2017, passed u/s. 143(3) r.w.s. 144C(3). Subsequently case of the assessee was taken up for reassessment by issuing notice u/s. 148, dated 30.03.2021. Reassessment was completed after making various additions which included addition of Rs. 1,96,64,542/- towards income from support service fees for which the Revenue is in appeal before us. The total income reassessed u/s. 147 r.w.s. 144C(3) was arrived at Rs. 74,48,94,460/-, incorporating the total income originally assessed u/s. 143(3) r.w.s. 144C(3).
8.1. While completing the reassessment, ld. Assessing Officer took note of the assessment year 2014-15, wherein similar treatment was given to the income from support services. In Para 9.3.4 of the impugned reassessment order, ld. Assessing Officer has taken note of the view of the department in assessment year 2014-15, wherein according to him, services have been held to be in the nature of fees for and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 technical services, as per the provisions of the Act and is taxable. The said para is extracted below for ready reference: “9.3.4 The submissions of the assessee are perused but the same is not acceptable because for the same type of services offered the department has taken the view in the assessment year 2014-15 that the said services are in nature of fees for technical services as per the provisions of the Act and is taxable as per section 115A of the Act. As there are no change in facts and the assessee has provided the same kind of services to Wells Fargo International Services Private Limited and Wells Fargo Real Estate Advisors Private Limited as was provided in assessment year 2014-15 to Wells Fargo International Services Private Limited. Thus the same is treated as fees for technical services as per the provisions of the Act and is taxable as per section 115A of the Act, due to the reasons below.”
8.2. It is also important to take note of the submissions made by the assessee on the same issue which has been taken into account by the ld. Assessing Officer and discussed in para 9.3.11 to Para 9.3.15 which are extracted below for ready reference. Here, assessee explained the nature of services provided by it to India entity: “9.3.11. At the cost of repetition, as has been asked in the show cause notice, the nature of service to be provided by the assessee to the WFISPL is again reproduced herein under 1. Advise and assist the Client with respect to corporate accounting, finance, and tax matters In connection with the Client's business and operations: 2. Provide data processing and other operational support for the Client in connection with the Client's business and operations; and 3. Render further advice, reports, information, documentation and assistance as may be reasonably required by the client in connection with the operation of its business and operations. 9.3.12. Besides the details and nature of services mentioned above, the Service is defined and interpreted at Clause 1.1 which narrates as under: "Services": the services set out in Schedule 1, as amended from time to time by the parties in writing Clause 5 speaks about personnel and sub-contracting. Sub clause 5.1 says that " All vice provider in providing the services shall be suitable skilled, qualified and experienced.” Sub clause 5.2 complements the sub clause 5.1 and agrees that "the service provider shall continue to be responsible to provider shall continue to be responsible to the Client and Ilableas Principal for such performance"
9.3.13. From the nature of service provided it is made out that the assessee is advising and assisting the staffs of the Client in corporate accounting, tax matters, finance etc. The assessee is also supporting the staffs of the Client in data processing and other operations. As specified in the agreement, the assessee has to provide suitably skilled, qualified and experienced personnel so as to get the performance up to mark. Secondly, the services may have to be amended time to time. 9.3.14. Now, the amendment in set of services from time to time will happen only when one type of job has been adequately learnt by the staffs of the Client. They need some more assistance in new type of job from the skilled and experienced personnel of the assessee. In this case, assessee's responsibility is to perform upto mark. This can happen only when the assessee's personnel trains the Client's staff to such an extent to get the performance as per clause 5.2 of the agreement. The assessee makes available the skilled, qualified and experienced personnel by itself or through sub-contractor to comply with the terms of the service agreement. 9.3.15. Now, the assistance and support to the existing staffs of the Client, for new set of service as amended time to time, through the skilled, qualified and experienced personnel tantamount to teaching, training and furthering the experience to the client's staff. This is the case of making available of the services and not the case of mere rendering the service to the client.”
8.3. From the above, we note that there are no changes in the factual matrix and the applicable law including the provisions of the Act and the Treaty provisions, when compared with the issue dealt in appeal for Assessment Year 2014-15 against the original assessment u/s 143(3) r.w.s. 144C(3). Nothing has been brought on record to controvert the observations and findings in appeal for Assessment Year 2014-15 and accordingly, the findings arrived at in appeal for Assessment Year 2014- 15 adjudicated by ld. CIT(A) against the original assessment passed u/s.143(3) r.w.s. 144C(3) squarely covers the case of the assessee for Assessment Year 2013-14. Ld. Assessing Officer also has based his finding on the view taken by the Revenue in Assessment Year 2014-15. Accordingly, we hold that income received by the assessee towards services provided cannot be considered as fees for technical services within the ambit of “make available” as required under India-USA DTAA and thus, are not taxable under the said treaty. We thus, do not find and 3795/Mum/2024 Wells Fargo Bank National Association AY 2014-15 and 2013-14 any reason to interfere with the findings arrived at by ld. CIT(A), while giving relief to the assessee on this issue. Grounds raised by the revenue in this respect are dismissed. In the result, appeal of the Revenue is dismissed.
In the result, both the appeals of the Revenue are dismissed.
Order is pronounced in the open court on 26 September, 2025