ACIT(IT)-1(2)(2), MUMBAI, MUMBAI vs. BCD TRAVEL SERVICES BV, NETHERLANDS

In this case, the return of income was filed by the assessee declaring total income at Rs. 12,512/-. Facts of the case are that assessee company is a foreign company formed under the laws of The Netherlands and is part of the BCD Travel Group which is engaged in the business of corporate travel management services and renders services outside India only. The Company is a tax resident of The Netherlands and is entitled to benefits under the India-Netherlands Double Tax Avoidance Agreement (Tax Treaty).It is a Global Travel Management Company primarily targeting multinational clients having global presence. Since the levels of operations of these clients are spread across globe, they require BCD Travel to have global network with local presence in order to support their travellers. In order to win these

1 During the year under consideration, the assessee company had received income in the nature of global network service fee amounting to Rs. 19,51,56,854/- from its Associate Enterprise, BCD Travel India Private Limited(BCDIPL) which has also been disclosed in the Form 3CEB of the assessee. It had claimed that the regional support service rendered by the Company was neither in the nature of royalty nor in the nature of FTS.The AO examined the contentions of the assessee and also the AE u/s 133(6) of the Act. On detailed analysis of documents/reply submitted by the assessee, it was noticed by the AO that the multinational clients booked by the BCD Travel group for travel

2 The AO noted that the assessee company had been entrusted specifically to facilitate the objective of providing support in the fields of Finance, Account Management, Human Resource and other similar support services to all the affiliated companies of BCD Group so that all the affiliate companies may gain access to standardized financial, accounting, human resources and other similar resources and ensure consistent, high quality business practice amongst the BCD Group entities. The dictionary meaning of the word „Information‟ is „things that are or can be known about a given topic‟ or „communicable knowledge of P a g e | 5 A.Y. 2023-24 BCD Travel Services BV something‟. All this information is in the nature of special commercial knowledge, experience and skill generated over a period of years by the BCD group and imparted to the Indian company BCDIPL and its employees to maintain high quality business practice of BCD Travel Group. From the details of the services, it was seen that even the software that was required by the Indian company for its core operations was supplied by the assessee company.

3 The AO went on the observed further that these descriptions of services showed that they were in areas which are crucial/core functions of the business of BCDIPL. For instance, under "Account management", the global team (of the assessee) was responsible for maintaining client relationships as well as identifying leads and business opportunities as well as resolution of client issues, which are integral part of the travel business. Similarly, under "Technology" head, the assessee provided access to "cutting edge and state of the art technology, which plays a very important role in the business travel management industry". The assessee provided services such as technology/product development, via technology infrastructure, enterprise development, information security, travel technology, client data solutions and product development. Similarly, the assessee involves itself in pricing

4 The assessee has also submitted several samples of email exchanges between the assessee and BCDIPL which illustrate how the above referred services were actually delivered in practice. Some of these examples illustrated in the assessment order, with the help of screenshots which further strengthened and supported the fact that the assessee was not only providing various core/crucial services to BCDIPL but also various other routine functions which are useful for running the travel business, thereby resulting in imparting of information concerning technical / industrial / commercial knowledge and experience/ skill in these functions. Before the AO, the representative of the assessee relied on the decision of the Jurisdictional Mumbai 8922/mum/2010, decision of the Ahmedabad Tribunal Marck

In the subsequent appeal the ld.CIT(A) noted that the AO after analysis of the services rendered under the existing GNSA had found that that the facts of the present AY were similar to the ones involved in previous AY‟s i.e. 2018-19 to 2020-21. The appeals pertaining to AY

Before us, it was claimed by the ld.AR that in ITA No. 4219 and 4240/MUM/2025(AY 2017-18 and 2018-19) in its own case, the coordinate bench of ITAT vide order dated on 29 September, 2025 deleted similar addition. Relevant extracts of the order as under:

Assessee submitted that the nature of commercial services rendered by the assessee during the year under consideration remained unchanged vis-a- vis past years. In the past, the agreement was titled as Global Service Level

Assessee has repeatedly pointed out that taxability of service fees received was examined by the ld. Assessing Officer in the assessee's own case for Assessment Year 2011-12 to Assessment Year 2013-14. In all these assessment years, ld. Assessing Officer had concluded the assessment proceedings accepting the position taken by the assessee that income earned is not taxable in India. Relevant observations of the ld. Assessing Officer in the assessment order for Assessment Year 2013- 14 are reproduced below for ready reference, whereby it is held that the nature of services rendered by the assessee are commercial services. These services do not result in rendering of managerial or specific consultancy services and therefore, not covered within the provisions of Article 12 and hence not taxable in India. Ld. Assessing Officer also notes that assessee has not made available any technical knowledge, skill, etc. and therefore it is not royalty nor FTS under the provisions of Article 12 of India-Netherlands DTAA. "

The submissions made by the assessee have been considered. The services rendered by the assessee viz finance, administration, legal, partner network, account management, marketing, business solutions, sales support etc are in the nature of 'commercial' services. These services do not result in rendering of managerial or specific consultancy services to BCD Travel India Pvt. Lid. Therefore, the services rendered are not covered within the provisions of the Article 12(5)(b) and consequently the income earned by the assessee is not taxable in India as the assessee has not made available any technical knowledge, skill, etc to BCD Travel India Pvt. Ltd In view of the above discussion, the income earned by the assessee in the form of support fees is neither royalty nor FTS under the provision of Article 12 of India-Netherlands Double Taxation Avoidance Agreement." (Emphasis supplied)"

In the observations of the ld. Assessing Officer, for the information communicated, the same is special commercial knowledge, experience and skill generated over a period of years by the BCD group. Assessee submitted, by referring to the commentary of Organization for Economic Cooperation and Development (OECD) of 2017, wherein it has given certain observations on payment for supply of know-how and payments for provision of services.

In classifying as royalty's payments received as consideration for information concerning industrial, commercial or scientific experience, paragraph 2 is referring to the concept of "know-how". Various specialist bodies and authors have formulated definitions of know-how. The words "payments ... for information concerning industrial, commercial or scientific experience" are used in the context of the transfer of certain information that has not been patented and does not generally fall within other categories of intellectual property rights. It generally corresponds to undivulged information of an industrial, commercial or scientific nature arising from previous experience, which has practical application in the operation of an enterprise and from the disclosure of which an economic benefit can be derived. Since the definition relates to information concerning previous experience, the Article does not apply to payments for new information obtained as a result of performing services at the request of the payer.

1 In the know-how contract, one of the parties agrees to impart to the other, so that he can use them for his own account, his special knowledge and experience which remain unrevealed to the public. It is recognised that the grantor is not required to play any part himself in the application of the formulas granted to the licensee and that he does not guarantee the result thereof.

2 This type of contract thus differs from contracts for the provision of services, in which one of the parties undertakes to use the customary skills of his calling to execute work himself for the other party. Payments made under the latter contracts generally fall under Article 7. 11.3 The need to distinguish these two types of payments, i.e. payments for the supply of know-how and payments for the provision of services, sometimes gives rise to practical difficulties. The following criteria are relevant for the purpose of making that distinction: Contracts for the supply of know-how concern information of the kind described in paragraph 11 that already exists or concern the supply of that type of information after its development or creation and include specific provisions concerning the confidentiality of that information. In the case of contracts for the provision of services, the supplier undertakes to perform services which may require the use, by that supplier, of special knowledge, skill and expertise but not the transfer of such special knowledge, skill or expertise to the other party. In most cases involving the supply of know-how, there would generally be very little more which needs to be done by the supplier under the contract other than to supply existing information or reproduce existing material. On the other hand, a contract for the performance of services would, in the majority of cases, involve a very much greater level of expenditure by the supplier in order to perform his contractual obligations. For instance, the supplier, depending on the nature of the services to be rendered, may have to incur salaries and wages for employees engaged in researching, designing, testing, drawing and other associated activities or payments to sub-contractors for the performance of similar services." (Emphasis supplied) 4. 5. In order to explain

We have heard both the parties and perused the material on record. We have also given our thoughtful consideration to the material placed on record including the assessment orders of the preceding years as well as case law

Further, we note that as per sub-clause (vi) to Explanation 2 of section 9(1)(vi) of the Act, royalty means rendering of any services in connection with the activities referred to in sub-clauses (i) to (iv), (iva) and (v). As already noted above, from the nature of services contained in GFNA, these include services in the field of finance, account management and human resource. These services are not in relation to transfer of all or any rights, imparting of any information concerning the working of, or the use of, a patent, invention, model, design, use of any patent, invention, model, etc. as contained in sub- clauses (i) to (iv), (iva) and (v) of Explanation 2. Considering these provisions under the Act, the services rendered by the assessee under the GFNA do not qualify to be royalty under the Act.

Further, we refer to Article 12(4) of the India- Netherlands DTAA which defines fees for technical services (FTS) according to which FTS means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provisions of such services through technical or other personnel), if such services - (a) 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 which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein.

From the above, we note that assessee has not provided any intellectual property or any other right. Support service fees charged by the assessee is not P a g e | 15 A.Y. 2023-24 BCD Travel Services BV technical in nature but in the nature of commercial services as accepted by the Department in the assessments for the preceding three assessment years. Accordingly, in the given set of facts, provisions contained in Article 12(4)(a) do not apply. Further, in reference to Article 12(4)(b), it is worth noting that BCD Travel India Private Limited would not be capable to render similar services without getting support from the assessee. The India entity continues to receive such support services from the assessee and therefore, the requirement of make available technical knowledge, skills etc., for the services to be characterized as FTS remains unfulfilled. Accordingly, services which are commercial or business services are not covered in the definition of FTS and hence, not taxable under Article 12 of the DTAA.

We note that the support service fee received by the assessee is neither royalty nor FTS. It is also not taxable as business profits under Article 7 of the DTAA, since business profits earned by a foreign company from operations in India are taxable in India only if, there is a permanent establishment (PE) of the foreign company in India. Thus, the business income of assessee would become taxable in India only if it had a PE in India. It is a fact on record that the services rendered by the assessee under GFNA were provided from outside India. Also, assessee does not have any office, employee, bank account or any other form of physical presence in India. Thus, activities of the assessee which have been performed from outside India do not constitute a PE in India and consequently, its income from support services is not taxable in India as business profits under Article 7 of the DTAA.

In the conspectus of the above discussion and the factual position including the accepted position of the Revenue in the preceding assessment years arising out of the common GFNA, the support service fee received by the assessee is not taxable both, under the provisions of the Act and the DTAA. Accordingly, grounds raised by the Revenue in this respect are dismissed.

In the result, appeal filed by the Revenue is dismissed.”

As admitted by the lower authorities, the facts involved in the case are exactly identical to previous assessment years wherein similar claim of the assessee has been allowed by the ld.CIT(A) as also by the coordinate bench of ITAT(supra) in AYs 2017-18 and 2018-19, there being no change in the fact pattern and the terms of the agreement as well as the position of law, respectfully following the same we affirm the P a g e | 16 A.Y. 2023-24 BCD Travel Services BV appellate order and thus, the grounds of appeal by the Revenue are dismissed.

In the result, appeals of the Revenue is dismissed.