Management Support Fees Not FTS Without ‘Make Available’ Under Article 12(4): ITAT Mumbai

Tech Data (Singapore) Pte Limited Vs DCIT (ITAT Mumbai)

The Mumbai ITAT partly allowed the assessee’s appeal against the assessment order passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961 for AY 2023-24. The assessee challenged the assessment on the grounds of limitation under Section 153 and the taxability of management support fees received from its Indian subsidiary. The Tribunal first rejected the limitation challenge, holding that in view of the retrospective amendments to Sections 144C, 153 and 153B, the assessment order had been passed within the prescribed limitation period.

The principal dispute concerned the taxability of ₹49,68,78,301 received for providing management and business support services, including strategic business advisory, information technology, finance, logistics, branding, tax, treasury, legal, ethics and compliance, human resources, trade compliance, and corporate and administrative services. The assessee contended that the services did not constitute Fees for Technical Services (FTS) under Article 12(4) of the India-Singapore DTAA and that, even if any services were managerial, technical or consultancy in nature, no technical knowledge, skill, know-how or experience had been made available to the Indian recipient to enable it to independently apply such knowledge.

The Assessing Officer held that part of the services constituted consultancy services and the remaining services were managerial services. According to the Assessing Officer, the “make available” requirement applied only to technical services and not to managerial services. On that basis, the fees were taxed as FTS. Alternatively, the Assessing Officer also treated the receipts as royalty under Section 9(1)(vi) of the Act and Article 12(3) of the DTAA. Although the Dispute Resolution Panel noted that the Tribunal had decided the identical issue in the assessee’s favour in earlier assessment years, it nevertheless upheld the Assessing Officer’s view while observing that the Department had no appellate remedy against favourable DRP directions.

The Tribunal observed that the issue was recurring and had already been decided in the assessee’s own cases for AYs 2019-20, 2020-21 and 2021-22. It noted that the service agreement and the nature of services remained unchanged. Referring to its earlier decisions, the Tribunal held that none of the conditions under Article 12(4)(a), (b) or (c) of the India-Singapore DTAA were satisfied. The services did not make available any technical knowledge, experience, skill, know-how or process, nor did they involve the development or transfer of any technical plan or technical design. The Tribunal found that the services were in the nature of operational management and support services. It also observed that while the definition of FTS under Section 9(1)(vii) of the Act is broader, Section 90(2) permits the assessee to rely on the more beneficial provisions of the DTAA. Accordingly, the receipts did not qualify as FTS under Article 12(4) and were not taxable in India.

Following its consistent decisions in the assessee’s own earlier years, the Tribunal directed the deletion of the addition of ₹49,68,78,301. In view of this finding, certain grounds were treated as academic or consequential and dismissed, while the appeal was partly allowed.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

Captioned appeal has been filed by the assessee challenging the final assessment order dated 30.10.2025 passed under Section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (in short ‘the Act’), pertaining to Assessment Year 2023-2024, pursuant to directions of learned Dispute Resolution Panel (DRP).

2. In Ground No. 1, the assessee has challenged the validity of the assessment order on the ground that it is barred by limitation in terms with section 153 of the Act.

3. We have considered rival submissions and perused the materials on record. Keeping in view the recent amendments made to Sections 144C, 153 and 153B of the Act with retrospective effect, we hold that the assessment order passed is within the period of limitation. Hence, this ground is dismissed.

4. In Ground No. 2, the short controversy is with regard to taxability of Rs.49,68,78,301/- as Fees for Technical Services, (‘FTS’), under Section 9(1)(vii) of the Act and Article 12(4)(b) of India-Singapore Double Taxation Avoidance Agreement, (DTAA).

5. Briefly, the facts relating to this issue are, the assessee had entered into an agreement with its subsidiary in India, viz. Tech Data Advance Private Limited (‘TD India) for providing management/business support services. The bucket of services under the agreement are;

(i) Strategic business advisory services

(ii), Information Technology Services

(iii) Finance (FP & A and controlling)

(iv) Logistics

(v). Branding

(vi) Tax

(vii) Treasury

(viii) Legal

(ix) Ethics and compliance

(x) Human resource

(xi) Trade compliance

(xii) Corporate, real estate and administrative services.

6. Before the Assessing Officer, assessee claimed that the services rendered not being in the nature of managerial, technical or consultancy services, the fee received from providing such services would not qualify as FTS under Article 12(4) of the Treaty. Without prejudice, it was submitted by the assessee that even assuming that any of the services come within the ambit of managerial, technical or consultancy services, however, in terms with Article 12(4)(b) of the Act, the fee received from services cannot be regarded as FTS, as in course of rendition of the services, the assessee had not made available any technical knowledge, know-how, knowledge, skill, experience, etc. to the service recipient enabling him to independently apply them, without the aid and assistance of the assessee. The Assessing Officer, however, was not convinced with the submissions of the assessee. He was of the view that part of the services performed come within the ambit of consultancy, whereas the other part would come within the ambit of managerial services. Having held so, he held that so far as managerial services are concerned, there is no need for fulfilment of make available condition as it only applies in case of technical services. Accordingly, he held that the fee received would qualify as FTS. Without prejudice, he also held that the fee received would also be in the nature of royalty under Section 9(1)(vi) of the Act and article 12(3) of the Treaty. Accordingly, he brought the amount to tax.

7. Against the draft assessment order, the assessee raised objections before learned DRP.

8. After considering the submissions of the assessee, though, learned DRP was convinced that in assessee’s case in preceding assessment years, ITAT has decided the issue in favour of the assessee, however, it observed that against any favourable direction in respect of assessee, the Department does not have any remedy of appeal. Therefore, for keeping the issue alive the learned DRP agreed with the submissions of the Assessing Officer that the amount received would qualify as FTS both under the Act as well as under the Treaty provisions. In terms with the directions of learned DRP, assessment was finalized.

9. We have heard the parties and perused the materials on record. It is a common point between the parties that it is a recurring issue and in past assessment years, the ITAT has decided the issue in favour of the assessee. Having gone through the materials available on record, we find that identical nature of dispute came up for consideration before the Coordinate Bench in Assessment Year 2019-20. While deciding the issue, the Coordinate Bench in ITA No. 2367/Mum/2022, in order dated 21.08.2023, after going through the service agreement and the nature of services provided by the assessee to the Indian subsidiary, concluded that the fee received do not qualify as FTS under Article 12(4) of the Treaty. The view so expressed in AY 2019-20 was followed in AYs 2020-21 and 2021-22 by the ITAT. In the latest order passed for AY 2021-22, the Tribunal, in order dated 29-07-2024, has held as under:

“6. We find that this Tribunal in ITA No. 3280/Mum/2023 for AY 2020-21, has decided a similar quarrel and held as under:-

“10. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above assesse has entered into an agreement with T.D. India, pursuant to which the assessee renders certain management and business support services to T.D. India. The services rendered inter alia includes finance, logistics, branding, business strategies, treasury, human resources etc. The assessee explained that all the resources undertaken as referred above were either support services, coordination or tax services without transfer of any technology skill to the recipient. With the assistance of ld. representative we have perused the decision of ITAT in the case of the assessee vide ITA No. 2367/Mum/2022 dated 21.08.2023 as referred above wherein identical issue on similar fact has been adjudicated in favour of the assessee. The relevant extract of the decision of the coordinate bench is reproduced as under:

“8. In ground No.3 of appeal, the assessee has assailed assessment order in treating management/services fee received by the assessee as FTS under the Act r.w. Article-12 of India-Singapore, DTAA. The assessee has drawn our attention to the Service Agreement at pages 23 to 29 of the paper book. The assessee has received management fee under the said Service Agreement. The nature of services rendered by the assessee are specified in Schedule-A to the aforesaid agreement. The gist of services provided by the assessee in different areas as detailed in Schedule -A is as under:-

• • • • Strategic business advisory services that shall and TDI in formulating its business plan for any given period.
      • Information Technology Services.
      • Finance (FP&A and controlling)
      • Logistics support from base country
      • Branding
      • Tax
      • Treasury
      • Legal
      • Ethics and compliance
      • Trade compliance
      • Human Resources
      • Real Estate Clause (3) of the said agreement specifies the compensation to be paid for providing the services. The rate of compensation is given in Schedule-B to the said agreement. A perusal of Schedule-B shows that for performing the services described in Schedule-A, the assessee shall be compensated at cost + mark up @ 7.5%. We find that the Assessing Officer has held that management fee received by the assessee for rendering services is in the nature of FTS. Article- 12(4) of India – Singapore DTAA defines the expression FTS. For the sake of ready reference clause -4 of Article 12 is reproduced herein under:-

“4. The term “fees for technical services” as used in this Article means payments of any kind to any person in consideration for services of a managerial technical or consultancy nature (including the provision of such services through technical or other personnel) if such services:

a. Are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or

b. Make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or

c. Consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply technology contained therein. For the purpose of (b) and (c) above, the person acquiring the service shall be deemed to include an agent, nominee or transferee of such person.

A perusal of the service agreement along with Annexure-A, that gives an exhaustive list of services to be rendered would show that none of the conditions mentioned in sub-clause (a)(b) and (c) of Clause -4 to Article -12 of India – Singapore DTAA are satisfied. There is no make available of technical knowhow nor there is any service rendered consisting of the development and transfer of a technical plan or technical design. The prerequisite for invoking Clause-4 of Article-12 of the DTAA is that either there should be transfer of some technical knowhow i.e. make available condition is satisfied or there should be development and transfer of technical plan or technical design. The services rendered by the assessee as per Schedule-A of the Service Agreement does not in any manner show that any technical knowhow has been made available or there is development and transfer of technical plan or technical design. The services rendered are in the nature of operational management and providing support system. The services also includes providing of training and developing strategies, etc. We find that the Assessing Officer has taken pains to segregate services rendered by the assessee under the segments technical, managerial and consultancy. However, no effort has been made by the Assessing Officer to examine whether the services rendered under the three segments fulfil the criteria so as to fall within the definition of FTS under Article-12(4) of the DTAA. In so far as the definition of FTS as defined in Section 9(vii) of the Act is concerned, we observe that the definition is much broader. The services rendered by the assessee may fall within the sweep of FTS as defined under the Act, but the assessee would be protected by provisions of section 90(2) of the Act. Section 90(2) of the Act lays down that, where the Central Government has entered into an agreement with any other Sovereign Nation for granting relief of tax or for avoidance of double taxation, then the provisions of the Act shall apply to the assessee only to the extent they are more beneficial to it. In case the provisions of the Act are more stringent, the assessee would be governed by the provisions of the DTAA. In the instant case, we find that the remuneration received by the assessee in lieu of services rendered do not fall within the meaning of FTS under Article-12(4) of the India-Singapore DTAA. Consequently, we hold that the payments received by the assessee in respect of management services are not taxable as FTS. In the result, ground No.3 of appeal is allowed.”

Since, the issue on hand being squarely covered by the decision of the ITAT in the case of the assessee itself as discussed above in this order, therefore, following the decision of the ITAT this ground of appeal of the assessee is allowed.”

7. It can be seen from the above that the Co-ordinate bench while deciding the appeal in favour of the assessee has followed the earlier decision given by this Tribunal in ITA No. 2367/Mum/2022 for AY 201920. Finding parity on facts, respectfully following the decision of the Co-ordinate Bench (supra), we direct the AO/TPO to delete the impugned disallowance.”

10. Undisputedly, the agreement under which the assessee is providing services to its Indian subsidiary is continuing from past assessment years. Therefore, there is no factual difference relating to the controversy in the impugned assessment year. In fact, learned DRP, while taking note of the decisions of ITAT, has accepted this position. Thus, respectfully following the consistent view expressed by the Coordinate bench in assessee’s case in past assessment years, we hold that the amount of Rs.49,68,78,301/-, not being in the nature of FTS under Article 12(4) of India-Singapore DTAA, is not taxable in India. Accordingly, this ground is allowed.

11. In view of our decision above, Ground Nos. 1 and 3 have become academic, hence, do not require adjudication. Ground Nos. 4 and 5, being consequential in nature, are dismissed. Ground No. 6 being premature, is also dismissed.

12. In the result, appeal is partly allowed.

(Order pronounced in the open court on 17.06.2026)