DCIT Vs Deloitte Toutche Tohmatsu India LLP (ITAT Mumbai)
No TDS Required on Internal Global Support Service Payments Due to Absence of Copyright Transfer; ITAT Deletes TDS Demand on Payments for Global Communication and Knowledge Management Services; Payments for Shared Global Services Not Royalty as No Intellectual Property Rights Were Transferred; Internal Network Software Usage Does Not Create Royalty Liability Under India-UK DTAA.
The appeals before the ITAT Mumbai concerned whether payments made by Deloitte Touche Tohmatsu India LLP to Deloitte Global Holdings Services Ltd. (DGSHL), a UK tax resident entity, towards Global Brand, Global Communications, and Global Technology/Knowledge Management services were taxable as royalty under Article 13(3) of the India-UK Double Taxation Avoidance Agreement (DTAA), thereby requiring deduction of tax at source under Section 195 of the Income Tax Act.
The assessee, a professional services LLP and part of the Deloitte global network, had entered into a Shared Service Agreement with DGSHL dated 01.08.2011. DGSHL was described as a special purpose entity established to facilitate international alignment, cooperation, cohesion, and professional standards among Deloitte member firms worldwide. DGSHL performed various activities for the common benefit of member firms and recovered related costs from members without any mark-up, operating on a break-even basis.
