FLOWSERVE PTE LTD,SINGAPORE vs. ACIT, CIRCLE INT. TAXATION 1(3)(1), NEW DELHI
Facts
Flowserve Pte Ltd., Singapore, received management service fees from its Indian associated enterprise (FICPL). While some fees for quality development and training were offered to tax, the assessee disputed the taxability of other services (planning, analysis, HR, finance) under Article 12 of the India-Singapore DTAA, claiming no technical know-how was made available. The AO and CIT(A) upheld the addition of the disputed fees, with the CIT(A) citing incomplete documentation for some services.
Held
The Tribunal observed that the CIT(A) upheld additions for certain management services based on alleged non-submission of complete details by the assessee, which the assessee disputed. The Tribunal decided to remand the matter back to the CIT(A) for re-examination of the documents already on record and any further submissions, instructing the CIT(A) to pass a speaking order on the taxability of these services.
Key Issues
Whether management service fees for planning, analysis, human resources, and finance services are taxable as 'fee for technical services' under Article 12 of the India-Singapore DTAA based on the 'make available' clause, and the adequacy of documentation provided by the assessee.
Sections Cited
195
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI
आयकर अपीलीय अिधकरण िद�ी पीठ “डी ”, िद�ी �ी िवकास अव�थी, �ाियक सद� एवं �ी �जेश कुमार िसंह, लेखाकार सद� के सम� IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER आअसं.1044/िद�ी/2023 (िन.व. 2019-20) ITA NO.1044/DEL/2023 (A.Y.2019-20) Flowserve Pte Ltd., Singapore C/o Deloitte Haskins & Sells LLP, Level 19, Prestige Trade Tower, No.46, Palace Road, Sampangirma Nagar, Bengaluru 560001. ...... अपीलाथ�/Appellant PAN: AABCF6860H बनाम Vs. Assistant Commissioner of Income-Tax, 1(3)(1), Minto Road, New Delhi 110002 ..... �ितवादी/Respondent अपीलाथ� �ारा/ Appellant by : Shri Vishal Kalra, Advocate Shri Kashish Gupta, CA Ms. Sumisha Murgai, CA �ितवादी�ारा/Respondent by : Shri S.N. Pandey, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 22/05/2024 घोषणा क� ितिथ/ Date of pronouncement : 31/05/2024 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-42, Delhi [in short ‘the CIT(A)’] dated 15.02.2023, for the Assessment Year 2019-20.
2 ITA NO.1044/DEL/2023 (A.Y.2019-20) 2. Shri Vishal Kalra, appearing on behalf of the assessee submitted that the solitary issue raised by the assessee in appeal is against the addition made on account of Management Service Fees. 3. Narrating facts of the case, the ld. Counsel submitted that the assessee is a tax resident of Singapore. During the period relevant to assessment year under appeal, the assessee received Management Service Fee amounting to Rs. 2,62,91,790/- from its associated enterprises in India Flowserve India Controls P. Ltd., (FICPL) for rendering management service. The service rendered by assessee includes planning and analysis, finance, human resources, training, engineering services, etc. FICPL while making aforesaid payments with held tax u/s. 195 of the Act. The assessee filed return of income for impugned assessment year on 30.11.2019, thereafter the assessee filed revised return of income offering an amount of Rs. 32,95,798/- as tax on fees received towards quality development and training services that make available technical skill, knowledge etc. as per the provision of India-Singapore DTAA. As regards, other services there was no transfer of knowhow or any technical skill was made available, hence, the fee in respect of other services is not taxable in India as per the provisions of India- Singapore DTAA. The ld. Counsel pointed that the assessee had made detailed submissions regarding operation of provisions of India-Singapore DTAA, the Assessing Officer (AO) has reproduced part of assessee’s submissions made on 29.09.2021, however, the AO without considering the provisions of Article 12 of India-Singapore DTAA added back the amount of Rs. 2,39,40,559/- as FTS taxable in India.
3 ITA NO.1044/DEL/2023 (A.Y.2019-20) 4. Aggrieved by the assessment order dated 18.11.2021, the assessee filed appeal before the CIT(A). 5. The First Appellate Authority after reproducing detailed submissions of the assessee, granted part relief in respect of payments received on account of Information Technology Services holding that make available criteria is not satisfied, hence, the same is not taxable in India. As regards planning and analysis/ corporate development services, human resources and finance services, the CIT(A) observed that the assessee has not furnished complete details of the exact nature of services rendered by the assessee to FICPL, and thus, upheld the addition. The ld. Counsel submitted that neither the CIT(A), nor the AO have examined the documents furnished by the assessee. The assessee had furnished all the relevant documents to substantiate that the services rendered by the assessee does not fall within the ambit of ‘fee for technical services’ within the meaning of Article 12 of India-Singapore DTAA, hence, not taxable in India. The aforesaid services do not “make available” any technical knowhow or transfer of technology. The counsel for the assessee prayed for deleting the addition. 6. Per contra, Shri S.N. Pandey, Sr. DR representing the Department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that the assessee has failed to substantiate its claim as the relevant documents were not furnished by the assessee. 7. We have heard the submissions made by rival sides and have examined the orders of authorities below. The assessee has rendered following management services to its AE in India:-
4 ITA NO.1044/DEL/2023 (A.Y.2019-20) (i) Information Technology Services; (ii) Planning and Analysis/Corporate Development Services; (iii) Human Resources; (iv) Finance Services; and (v) Quality Development and Training. In so far as Quality Development and Training services are concerned, the assessee has offered the same to tax, conceding that there has been transfer of knowhow and technology. As regards Information Technology Services, the CIT(A) after examining the same has come to the conclusion that since make available criteria as specified under India-Singapore DTAA is not satisfied, hence, fee payable in respect of information technology services is not taxable in India. 8. In so far as other services i.e. planning analysis/corporate development, human resources and finance, the CIT(A) has upheld the addition solemnly on the ground that the assessee has not furnished complete details, therefore, exact nature of services could not be determined. On the other hand, the contention of the assesee is that all relevant documents were furnished before the AO, as well as the CIT(A), but the same have not been examined by the First Appellate Authority. Taking into consideration entire facts, we deem it appropriate to restore this issue back to the file of the CIT(A), for re-examine the documents already furnished by the assessee available on record and also any other documentary evidence/submissions furnished by the assessee to substantiate its claim. The CIT(A), after examining the documents shall pass a speaking order with
5 ITA NO.1044/DEL/2023 (A.Y.2019-20) regard to Planning & Analysis/Corporate Development Services, Human Resources & Finance Services, in accordance with law. 9. In the result, appeal of the assessee is allowed for statistical purposes in the aforesaid terms. Order pronounced in the open court on Friday the 31st day of May, 2024. Sd/- Sd/- (BRAJESH KUMAR SINGH) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी / Delhi, �दनांक/Dated /05/2024 NV/-
�ितिलिप अ�ेिषतCopy of the Order forwarded to : 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. The PCIT 4. िवभागीय �ितिनिध, आय.अपी.अिध., िद�ी /DR, ITAT, िद�ी 5. गाड� फाइल/Guard file. BY ORDER,
//True Copy// (Dy./Asstt. Registrar) ITAT, DELHI
