NTT ASIA PACIFIC HOLDINGS PTE.LTD FORMERLY KNOWN AS DIMENSION DATA ASIA PACIFIC PTE. LTD,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX(INTERNATIONAL TAX) 2(1) (2), MUMBAI

Shri Sunil Moti Lala appearing on behalf of the assessee submitted at the outset that the primary issue raised in this appeal in ground No.1 is, that the income earned by the assessee by way of management fee has been wrongly assessed to tax as Fees for Technical Services (FTS). The ld.Counsel for the assessee submitted that the assessee is a company based in Singapore. The assessee is providing business support services to its Indian subsidiary in accordance with Business Support Agreement dated 1st April,2014 ( Page 11 to 22 of paper book). The Assessing Officer and the Dispute Resolution Panel (DRP) held that the amount charged by the assessee for providing such services fall within the meaning of FTS, and the conditions necessary to activate “make available clause” are also satisfied. Hence, the amount is taxable under the provisions of the Act. The ld.Counsel for the assessee pointed that for similar reasons the addition was made in Assessment Year 2017-18. The assessee carried the issue in appeal before the Tribunal in ITA No.1212/Mum/2021. The Tribunal vide order dated 04/07/2022 held that the amount received by the assessee from its Indian subsidiary does not fall within the meaning of FTS and hence, directed the Assessing Officer to delete the addition. The ld. Authorized Representative for the assessee pointed that in the preceding Assessment Year, the assessee was providing management services to the Indian entity in accordance with same Business Support Agreement, hence, the facts are identical. The ld.Counsel for the assessee further referred to the directions of the DRP in impugned assessment year para 4.3 to show that the DRP has followed the directions of DRP in Assessment Year 2017-18.

Per contra, Shri Soumendu Kumar Dash representing the Department vehemently supported the Assessing Officer and directions of the DRP. The ld.Departmental Representative pointed that there are changes in the agreement, the Tribunal has not considered the changes in agreement while passing the order in assessment year 2017-18. The ld.Departmental Representative submitted that the matter can be restored to Assessing Officer for fresh examination.

Both sides heard, orders of authorities below examined. The assessee is providing management support services to the Indian entity by virtue of agreement dated 01/04/2014 (supra). The contention of the assessee is that the facts in the impugned assessment year are identical to the facts in Assessment Year 2017-18. In support of the submissions, the assessee has referred to findings of the DRP. We find that in para 4.3.1 of DRP directions, the DRP has observed that the issue of payment of management fee taxable as FTS was considered by the DRP in Assessment Year 2017-18. The DRP in the impugned assessment year has thereafter quoted the entire findings of the DRP for Assessment Year 2017-18 and finally concluded that material facts are same during the year under reference. The assessee, aggrieved by the assessment order for Assessment Year 2017-18 carried the issue in appeal before the Tribunal. The Co-ordinate Bench in (supra) has discussed the issue threadbare and held as under:

While on this issue, it will be useful to refer to the following observations made by a coordinate bench, in the case of Shell Global International Solutions BV Vs ITO [(2015) 64 taxmann.com 3 (Ahd)], as follows: 17. As for the connotations of 'make available' clause in the treaty, this issue is no longer res integra. There are at least two non-jurisdictional High Court decisions, namely Hon'ble Delhi High Court in the case of DIT v. Guy Carpenter & Co Ltd. [2012] 346 ITR 504 and Hon'ble Karnataka High Court in the case of CIT v. De Beers India (P.) Ltd. [2012] 346 ITR 467/208 Taxman 406/21

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”. Technology 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 or technology. It is not a question of, as the learned DRP put it, enriching “the service recipient, making him wiser to face similar challenges in future on his own and acquiring the skills to deal with these issues”, but the test is whether the rendition of these services per se enables the recipient to provide the similar services, without recourse to the service provider, in future. An incidental benefit or enrichment which may add to the capabilities is not sufficient; the critical factor triggering the taxability in the source jurisdiction is the transfer of skills. That is what the Hon'ble’ble Karnataka High Court has held in the case of De Beers (supra), and this judicial precedent, in the absence of anything to the contrary having been held by Hon'ble’ble jurisdictional High Court, is binding on this forum. That condition about the transfer of skills and absorption of kill by the recipient of service, in our humble understanding, is not satisfied. 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 (1) 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.

In view of the above discussions, as also bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to exclude the sum of Rs 121,14,85,623 from his taxable income as fees for technical services. The assessee thus gets the relief accordingly.”

The Revenue has failed to show any distinguishing fact in the impugned assessment year. Respectfully following the decision of Co-ordinate Bench, ground No.1 of the appeal is allowed for parity of reasons.

In ground No.2 of appeal the assessee has assailed short grant of TDS against demand raised for assessment year 2019-20. This issue is restored to Assessing Officer with a direction to re-examine and allow TDS credit after reconciliation in accordance with law. Hence, ground No.2 of the appeal is allowed for statistical purpose.

In ground No.3 of appeal, the assessee has assailed charging of interest u/s 234B of the Act. Interest u/s. 234B of the Act is mandatory and consequential hence, ground No.3 of the appeal is dismissed.

In the result, appeal by assessee is partly allowed.