INVESCO HOLDING COMPANY (US) INC.,USA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE INTERNATIONAL TAXATION 2(1)(1), DELHI, DELHI

In our understanding, in order to invoke make available clauses, 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." 3.5 The aforesaid observation further stands affirmed by the Hon'ble Jurisdictional High Court in Commissioner of Income tax (International Taxation)-1 v. Bio Rad Laboratories (Singapore) Pte. Ltd. - [2023] 155 taxmann.com 646 (Delhi) wherein it has been held as under- "14. According to the Tribunal, the agreement between the respondent/assessee and its Indian affiliate had been effective from 1-1- 2010, and if, as contended by the appellant/revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1 Notably, this aspect is adverted to in paragraphs 17 to 23 of the impugned order. For convenience, the relevant paragraphs are extracted hereafter: ……..

We tend to agree with the analysis and conclusion arrived at by the Tribunal."

As with regard to the observations of tax authorities below treating the services rendered by Assessee as FIS on the basis that the Assessee was providing training to the personnel of Invesco Group and thus the 'make available condition stands satisfied in the present case the Ld. Counsel submitted that the Assessee only supports and administers IT training and same does not lead to transmission of specialized knowledge or skill. In this regard reliance is placed on the decision of the Hon'ble jurisdictional High Court in the case of SFDC Ireland Limited v. Commissioner of Income Tax & Another [Neutral Citation 2024: DHC: 1910-DB/ wherein it has been held as under- "42. Insofar as the products for SFDC India's internal use were concerned, they stood restricted to those which would enable SFDC India to demonstrate the functionality of SFDC products in trade shows and exhibitions, to train its customers and employees on the use of those products and products to administer and manage customer accounts. None of these aspects would appear to be imbued with a technical hue. Imparting training or educating a person with respect to the functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA. More importantly, the technical assistance and training which the petitioner proposed to provide was confined to marketing. distribution, support and sale of SFDC products. The assistance and training which Section 4.3 of the Reseller Agreement speaks of was concerned with fields wholly unrelated to providing technical service.

Similarly Exhibit B speaks of the products being concerned with assisting the Reseller in the performance of its sales and marketing obligations. All of the above was thus aimed at merely equipping and educating the representatives of SFDC India to be in a position to comprehensively brief potential customers. The training and assistance was thus primarily aimed at the sale of SFDC products and customer related issues. This does not appear to comprise a transmission of (A.Y.2022-23) specialised knowledge or skill. This more so when we bear in mind the indubitable fact that the phrase "technical service" is to be read in conjunction with "managerial" and "consultation" and it being the settled position in law that the principle of noscitur a sociis is to apply. 4.1 Ld. Counsel has submitted that the above observations of the Hon'ble High Court have been rendered in the context of Section 9(1)(vii) of the Act read with Article 12 of the IndiaIreland DTAA wherein the condition of make available is not contained therein. Be that as it may, the Hon'ble High Court has categorically held that provision of training does not educate a person with respect to the functionality and attributes of the product or the service and could not be classified as a technical service.

Ld. Counsel also distinguished the reliance by AO on the AAR ruling in the case of Shell India Markets Private Limited by submitting that same stands overturned in view of the decision of Hon'ble Bombay High Court in the case of Shell India Markets Private Limited v. The Union of India & Others [Neutral Citation-2024: BHC-AS:10000-DB). In the said case while overturning the ruling of the AAR, the Hon'ble Bombay High Court has held as under- "18. …. …. …… A perusal of the list of services relate to managerial services not involving anything of a technical nature. The AAR has discussed the services appearing in the CCA and has concluded that these activities in a retail business are at the core of retail marketing and hence advice tendered in taking a decision of commercial nature is a consultancy service. The AAR has further considered the definition of the word 'Consultancy' as defined in the Oxford English dictionary and has observed that a consultant is a person who gives professional advice or services in a specialized field. However, the AAR failed to appreciate that the word 'Consultancy' appearing in the Article is to be interpreted in the context of consultancy which makes available technical knowledge, etc. and not of managerial nature. The reading of the Article clearly indicates that the consultancy service must be which makes available technical knowledge, etc. Sub-para (c) to Article 13(4) restricts such services to those which make available technical knowledge or consist of development and transfer of a technical (A.Y.2022-23) plan or technical design. Thus, a harmonious reading of the provision of Article 13 in its entirety, clearly establishes the intent of the DTAA in making income chargeable to tax only if the services availed pertain to technical services or consultancy services. Technical services in this context mean services requiring expertise in a technology. By Consultancy Services, in this context, would mean advisory services. The categories of technical and consultancy services are to some extent, overlapping. Under paragraph 4. technical and consultancy services are considered included services only to the following extent: (1) as described in paragraph 4(3), If they are uncillary and subsidiary to the application or enjoyment of a right, property or information for which a payment described in paragraph (3)(4) of Article 13 received: (2) are ancillary and subsidiary to the enjoyment of the property for Chich a payment described in paragraph (3)(b) of Article 13 is received on (3) as described in paragraph above they make available technical knowledge, experience, skill know how the preces of consist of the development and transfer of a technical plan of technical design. Thus, nature paragraph 4(c), consultancy services which are not of a technical nature cannot be included services. Thus, the services availed by Petitioner cannot be said to the technical services and Article 13 is wholly inapplicable in the facts and circumstances of the present case.

Thus, we have no hesitation in holding that the impugned order dated 17th January 2012 of AAR suffers from legal infirmity and is quashed and set aside. 5.1 Ld. DR has however relied the orders of the authorities below.

In this context we find that in regard to IT administration services the assessee was providing services where the IT training and facilities training, were of desktop application tools such as Microsoft Word, excel and power point etc to staff of the group.

Ld. Counsel has also stressed that otherwise too, the fee received by the Assessee is in the nature of reimbursement as it is simply allocation of costs without any mark-up and thus same not be treated as income of the Assessee. In this regard reliance is placed on the decision of the Hon'ble High Court of Delhi in the case of Planetcast International Pte. Ltd. v. ACIT-(2023) 152 taxmann.com 422 (Delhi Trib.) wherein it has been held as under:- "59. We have considered rival submissions and perused the materials on record. From the assessment order, it is discernible that the receipts are in the nature of cost-tocost reimbursement of payments made to Singapore government. Hence, the receipts did not have any profit element embedded therein. In fact, the Assessing Officer has not disputed the aforesaid factual position. In case of DIT (International Taxation) v. A.P. Moller Maersk AS [2017] 78 taxmann.com 287/246 Taxman 309/392 ITR 186/[2017] 5 SCC 651. the Hon'ble Supreme Court has observed that once the character of the payment is found to be in the nature of reimbursement of expenses without having any profit element embedded therein, it cannot be held to be chargeable to tax.

It comes up that the AO has not made any enquiry to rebut the claim of the assessee that the cost incurred by the assessee company for providing IT support services is allocated to its AE’s without any element of profit. In this context as we consider the copy of a MSA dated 20.05.2019 as made available on pages 131 to 149 of the paper book alongwith the copies of debit note made available on pages-150 to 153 of the paper book. We find that it was agreed that remuneration for the services has been calculated with the objective of determining an arms length price for the services provided by using methodology as set forth under ‘service fee clause”. The annexure-1 provided that service fee (A.Y.2022-23) shall be determined and allocated to the parties based on allocation keys for which in the appendix, annexure-2 provided as under :- “Annex II to the Master Intercompany Service Agreement made on 20 MAY, 2019 between Invesco (India) Private Limited ("the Recipient") and Invesco Holding Company (US) Inc. ("the Provider") Services Provided Commencing on 01 April 2018, the Provider will provide IT support services to the Recipient in respect of IT Application Service Functions, IT Infrastructure Service Functions and IT Security & Administration Service Functions. Details of the services are included in the table below. For the avoidance of doubt, the table below provides a non-exhaustive description of the types of services to be provided for the benefit of the Recipient. Not all services may be provided to the recipient and charges are only made for the actual services provided. Allocation key As these costs are not directly attributable to a particular beneficiary, they are allocated out according to each cost center's allocation methodology. The methodologies chosen, for example, could be based on full time equivalents by location, number of users, actual costs, number of desktops, historical time, management estimate, user traffic, headcount or a blend of several. Each cost center determines the most applicable and logical allocation methodology based on the functions of the employees in the cost center or the function of the cost center itself. The rationale for this is that the recipient is only being recharged in proportion to the usage and benefits of the services provided.”

In the light of aforesaid were inclined to hold that the tax authorities below have fallen in error in not appreciating that the reimbursement was on cost to cost basis. Accordingly we sustain this argument of the Ld. Counsel also.

In the light of aforesaid the grounds raised are sustained and the appeals of the assessee are allowed.”

No contrary material has been placed before us by the Revenue to controvert earlier finding of the Tribunal, hence, we see no reason to deviate from the earlier decision of the Coordinate Bench. The addition of Rs.54,85,23,539/- is thus directed to be deleted for parity of reaons. The assessee succeeds on ground no. 1 to 6 of appeal.