MICHAEL PAGE INTERNATIONAL PTE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION ) -3(2)(2), MUMBAI

In this appeal, the assessee has raised the following grounds:

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a resident of Singapore and incorporated on 30/09/1998. The assessee is engaged in the business of providing executive search and recruitment services, and also provides management support services and referral services to the Page Group entities. For the year under consideration, the assessee filed its return of income on 30/11/2022, declaring a total income of Rs. 72,817 and claimed a refund of Rs. 11,96,118. During the assessment proceedings, it was observed from the computation of income that the assessee, inter alia, earned Rs. 15,59,23,979 as income from management support services. However, the assessee claimed that the said earnings are not taxable in India in the absence of Permanent Establishment under the provisions of the India-Singapore DTAA. Accordingly, during the assessment proceedings, the assessee was asked to show cause as to why the income from rendering management support services should not be taxed as FTS under the provisions of Article 12 of the India-Singapore DTAA. In response, the assessee submitted that the receipts from rendering management support services are not taxable as FTS under Article 12 of the India-Singapore DTAA, as these services do not make available any technical knowledge, skill or know-how to the Indian entity.

The Assessing Officer (“AO”), vide draft assessment order dated 30/03/2024 passed under section 144C(1) of the Act, disagreed with the submissions of the assessee and held that the services are highly technical in nature and as a result of the rendition of the services to the Indian entity, there is a transfer of skills or technology. Further, the AO, after noting that there is no change in the facts of the case as compared to the preceding year, wherein the similar addition was made, assessed the income earned by the assessee from the rendition of management support services as FTS under section 9(1)(vii) read with Article 12(4) of the India-Singapore DTAA.

The assessee filed detailed objections against the addition made by the AO. Vide directions dated 27/11/2024, issued under section 144C(5) of the Act, the learned DRP, following its directions rendered in assessee’s own case for the assessment year 2018-19 rejected the objections filed by the assessee, even after noting that identical issue in assessee’s own case has been decided in its favour by the coordinate bench of the Tribunal in preceding year, to keep the issue alive and to protect the interest of the Revenue.

In conformity with the directions issued by the learned DRP, the AO vide impugned final assessment order dated 09/12/2024, assessed the income received from rendering management support services as FTS under section 9(1)(vii) read with Article 12(4) of the India-Singapore DTAA. Being aggrieved, the assessee is in appeal before us.

We have considered the rival submissions and perused the material available on record. We find that while deciding a similar issue raised in assessee’s own case in Michael Page International Recruitment Private Limited V/s DCIT, in for the assessment year 2017-18, the coordinate bench of the Tribunal vide its order dated 04/07/2022 held that the income earned by the assessee from rendering management support services is not taxable as FTS under the provisions of Article 12(4) of the India-Singapore DTAA. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: – “8. Clearly, therefore, unless the recipient of the services, by virtue of rendition of services by the assessee, is enabled to provide the same services without recourse to the service provider, the services cannot be said to have made available the recipient of services. A mere incidental advantage to the recipient of service is not enough. The test is the transfer of technology, but then it is not even the case of the revenue that there is a transfer of technology, and what is highlighted is the incidental benefit to the assessee, which is treated as an enduring advantage. As observed in the binding judicial precedents referred to above, in order to invoke "make available' clause, "to fit into the terminology "making available", the technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end" and "the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider". Technölogy will be considered "made available" when the person acquiring the service is enabled to apply the technology. In our considered view, that condition is not satisfied on the facts of the present case. We, therefore, hold that that 'make available' clause in the Indo-Singapore tax treaty cannot be invoked on the facts of the present case- as no case is even made out by the revenue that as a result of rendition of these services to the Indian entity, there is any transfer of skill of technology. Once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Income Tax Act, 1961, as in terms of Section 90(2), "where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (I) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee". The taxability of impugned receipts, under section 9, is thus wholly academic. We leave it at that.

As regards the question regarding a change in the stand of the assessee and the facts of the assessee's offering the same income to tax in the immediately preceding assessment years, nothing really turns on the stand of the assessee in the immediately preceding assessment years. There is no res judicata in the income tax proceedings and the mere fact of an assessee's offering an income to tax in an earlier year can be a reason enough to negate his otherwise lawful claim of non-taxability. The matter in required to be examined on merits, and once we find it to be an acceptable claim on merits, such taxability in the immediately preceding assessment years cannot come in the way of the assessee's lawful claim. This objection of the authorities below, therefore, does not deserve our approval either.

In view of the above discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to exclude the sum of Rs 3,06,12,630 from his taxable income as fees for technical services. The assessee gets the relief accordingly. In the light of our this conclusion, other issues raised in the appeal are rendered academic and these do not call for any specific adjudication.”

We find that similar findings were rendered by the coordinate bench of the Tribunal in assessee’s own case in for the assessment year 2018-19 vide order dated 02/12/2022, following the aforesaid decision for assessment year 2017-18.

The learned Departmental Representative could not show any reason to deviate from the aforesaid orders, and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decisions of the coordinate bench of the Tribunal for the assessment years 2017-18 and 2018-19. Thus, respectfully following the orders passed by the coordinate bench of the Tribunal in assessee’s own case cited supra, we uphold the plea of the assessee and delete the impugned addition in respect of income earned by the assessee from rendering management support services. As a result, ground no. 2 raised in assessee’s appeal is allowed.

As regards ground no. 3, raised in assessee’s appeal, the learned AR submitted that the assessee, suo moto, discharged the equalisation levy at the rate of 2% on its income earned from rendering management support services, and the assessee is not claiming any refund of the same. Thus, the learned AR submitted that if the relief is granted to the assessee in respect of ground no. 2, then the assessee wishes not to press ground no. 3 raised in its appeal. Therefore, in view of our decision rendered in respect of ground no. 2 and in light of the submissions of the learned AR, ground no. 3 raised in assessee’s appeal is rendered infructuous and therefore is dismissed.

The issue arising in ground no. 4, raised in assessee’s appeal, pertains to the levy of interest under section 234B of the Act, which is consequential in nature. Therefore, ground no. 4 needs no separate adjudication.

Ground no. 5 raised in assessee’s appeal pertains to the levy of penalty under section 270A of the Act, which is premature in nature. Accordingly, ground no. 5 raised in assessee’s appeal is dismissed.

In the result, the appeal by the assessee is partly allowed. Order pronounced in the open Court on 15/05/2025