DEPUTY COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION-(4)(2)(2) MUMBAI, MUMBAI vs. STANTEC UK LIMITED, UNITED KINGDOM

The assessee is a company registered in the United Kingdom (UK) and the tax resident of UK. The assessee is engaged in the business of consulting, engineering, construction and management of wet infrastructure projects in the world. Stantec Resource Net India Pvt. Ltd. is an Associated Enterprise (AE) of the assessee to whom the assessee has rendered certain technical and other services. The assessee filed the return of income for AY 2018-19 on 30.11.2018 declaring a total income of Nil and for AY 2019-20 declared total income of Rs. 6,12,85,790/-. For the purpose of adjudication we have considered AY 2018-19 as 4 ITA No.6734 & 6735/Mum/2024 & C.O. 26 & 27/Mum/2025 Stantec UK Limited a lead case. The details of the sum received by the assessee towards rendering of technical and other services are tabulated below:

The Assessing Officer (AO) issued a show-cause notice to the assessee as to why these services cannot be treated as Fees for Technical Services (FTS) and brought to tax in India. The assessee made a detailed submission explaining the nature of services rendered by the assessee to its AE. The assessee submitted that no technical knowledge, experience, skills etc. is "made available" to the recipient of the services to enable them to use the same independently in future without the recourse to the assessee. Accordingly, the assessee submitted that the technical services are not taxable in India as per the DTAA between India and UK. With regard to receipt towards other services, the assessee submitted that it does not contain any profit element and is the reimbursement on a cost to cost basis. Accordingly, the assessee submitted that the same cannot be brought to tax in India. The AO however, did not accept the submissions of the assessee and held that the receipt of the assessee should be treated as FTS and accordingly made addition of the entire amount of Rs. 5,97,00,210/-. The AO did not give any specific finding with regard to the amount received towards rendering other services as reimbursement by the assessee.

Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) allowed the appeal in favour of the assessee by holding that 5 ITA No.6734 & 6735/Mum/2024 & C.O. 26 & 27/Mum/2025 Stantec UK Limited

4.1 During the relevant financial year, the actual services rendered are as follows: Sr.No. Description Nature of Service Amount (in I NR) 1 INet Charges Technical Services 57,748,226 2 Information System Maintenance charges

4.2 In the instant case, though the appellant admits that the services rendered by the Appellant are in the nature of technical/ consultancy services, it does not involve any development or transfer of technical plan or design, the said services can be considered as "FTS" under Article 13 of the India-UK DTAA only if they make available technical knowledge, experience, skill, know-how, or processes. The Appellant provides ongoing IT support to its AE, Stantec RNet to resolve its technical issues / queries and to ensure smooth functioning of day-to-day IT operations. The very fact that 7 ITA No.6734 & 6735/Mum/2024 & C.O. 26 & 27/Mum/2025 Stantec UK Limited these services are obtained on a recurring basis demonstrate that the Appellant does not impart / share technical knowledge with Stantec RNet and Stantec RNet recourses to the Appellant wherever such services are required. The technical services do not impart any specialized knowledge to Stantec RNet. Further, the Appellant through the provision of said services, cannot be said to equip Stantec RNet in the manner that Stantec RNet can independently perform these functions itself in future, without recourse to the Appellant. In other words, Stantec RNet is not able to use the knowledge or experience of the Appellant without recourse to it. Also, though the services are technical in nature and are rendered by the people having technical expertise, it does not make available or transfer technical knowledge to Stantec RNet. The expertise required in performing such services is not made available by the Appellant to Stantec RNet and therefore, Stantec RNet is not able to apply any expertise on their own.

4.3 It will be relevant to quote the relevant para of the decision wherein the make available issue was discussed by Hon'ble ITAT, Mumbai in its decision in ITA no.961/MUM/2016 dtd. 29.12.2021 for AY 2012-13 as follows:

4.4 Apart from the decision in its own case, the appellant has quoted various decisions in its favour as per its submission in above paragraphs. Thus, the term 'make available is interpreted to mean making available technical knowledge, experience, skills, etc, in such a manner that the recipient is enabled to use the same independently in future without recourse to the original provider. This is not proved by the AO in the assessment order and the facts of the case. Accordingly, I agree with the appellant that the services under consideration as provided by the Appellant to its AE are not taxable in India as "FTS" under Article 13(4) of the India-UK DTAA. Similarly I agree with the appellant that reimbursement of expenses has been received by the Appellant on cost-to-cost basis and hence the same cannot be brought to tax in terms of the Act. Appeal is allowed on this ground.

The ld. AR reiterated the submissions made before the lower authorities. The ld. AR further submitted that the assessee is rendering the impugned services continuously to its AE which substantiates the fact that no knowledge or skill is made available by the assessee. Accordingly, the ld. AR submitted that the receipts in the hands of the assessee towards rendering technical service cannot be held as FTS as per the DTAA between India and UK. The ld. AR further submitted that the issue is now settled by the decision on the impugned issue by the Co-ordinate Bench in assessee's own case which has been rightly relied on by the CIT(A).

The ld. DR on the other hand vehemently argued that the decisions of the Tribunal in assessee's own case in earlier years were with regard to the receipts in the hands of the assessee as per the old agreement entered into by the assessee with its AE. For the year under consideration the assessee has entered into new agreement and therefore, the decision of the Co-ordinate Bench cannot be applied directly.

We heard the parties and perused the material on record. The assessee has entered into agreement with its AE for rendering services as tabulated in the earlier

Ground No. 4 to 5 raised by the revenue is with regard to the reimbursement of cost incurred towards rendering other services by the assessee to its AE. The AO while making addition has considered the entire receipt including the reimbursement as FTS and has not given any specific findings with regard to 11 ITA No.6734 & 6735/Mum/2024 & C.O. 26 & 27/Mum/2025 Stantec UK Limited reimbursements. The CIT(A) has accepted the contention that the reimbursement is on a cost to cost basis and gave relief to the assessee. Before us the ld. AR submitted that the receipts are purely reimbursements without any profit element and therefore there is no income to be brought to tax in India.

From the perusal of the nature of services for which the assessee has received the reimbursement, we notice that the receipts are towards the cost incurred by the assessee and claimed as reimbursement from its AE. It is the claim of the ld. AR that the said reimbursement is on a cost to cost basis and the revenue did not controvert the same during the course of hearing. The assessee also made an alternate submission that the impugned reimbursements cannot be treated as FTS or business income. When there is no income element in the amount received by the assessee, we hold that the same cannot be taxed as income in the hands of the assessee in India following the settled legal position in this regard. Accordingly we see no infirmity in the findings of the CIT(A) deleting the addition made by the AO. 10. In result, the appeal of the Revenue for AY 2018-19 is dismissed.

For AY 2019-20, the assessee has received the following amounts which the AO has held as FTS. Sr. No. Description Nature of Service Reasoning for non- taxability Amount (in INR) 1 INet Charges Technical Service The services provided do not “make available” technical knowledge, experience, skill, know-how or process and hence, not taxable by virtue of provisions of India-UK tax treaty 54,037,025 2 Annual System These are pure 4,215,027

From the perusal of the above table it is clear that the charges received towards iNet charges are identical to the similar charges received for AY 2018-19. Accordingly, in our considered view our decision for AY 2018-19 towards technical services rendered by the assessee to its AE not to be treated as FTS is applicable for AY 2019-20 also. Therefore, we hold that the amount received by the assessee towards technical services do not make available any technical knowledge or skill with recipient and therefore cannot be treated as FTS within the meaning of Article-13 of DTAA between India and UK.

From the perusal of the amounts received towards reimbursement of expenses, we notice that the same are pure reimbursement of expenses incurred by the assessee which is charged back to the AE. For AY 2019-20 also we notice that the AO has not given any independent finding with regard to the reimbursement of expenses but has considered the same along with the technical services rendered by the assessee to make addition treating the entire amount as FTS. We have while deciding the similar issue for AY 2018-19 have held that there is no infirmity in the decision of CIT(A) in deleting the addition made by the AO. Since the facts for the impugned issue for AY 2019-20 are identical in our considered view our decision in AY 2018-19 is mutatis mutandis applicable to AY 2019-20 also.

In result, the appeal of the Revenue for AY 2019-20 is dismissed.

In the C.O. for AY 2018-19 & AY 2019-20, the assessee is contending the same issue of treatment of technical and other services as FTS for the reason that the same do not amount to make available under Article-13 of DTAA between India and UK. The assessee also raised a without prejudice ground that the beneficial rate under section 115A of the Act shall be applied, if the impugned receipts is held as taxable in India. In view of our decision with regard to the appeal filed by the Revenue, the grounds raised by the assessee in C.O. for AY 2018-19 & AY 2019-20 have become infructuous and dismissed accordingly.

In result, the appeal of the revenue and the C.O. of the assessee for AY 2018-19 & AY 2019-20 are dismissed. Order pronounced in the open court on 27-02-2025. (AMIT SHUKLA) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS