IN THE ITAT MUMBAI BENCH ‘L’
Deputy Director of Income-tax (IT)
Versus
Euro RSCG Worldwide Inc.
IT Appeal No. 7094 (Mum.) of 2010
[Assessment year 2010-11]
NOVEMBER 27, 2012
ORDER
B. Ramakotaiah, Accountant Member
This is a Revenue appeal against the orders of the CIT (A)-10 Mumbai dated 30.07.2010. The Revenue has raised two grounds which are as under:
“1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting the payment of Rs. 27,63,150/- received from ERAPL for providing assistance in client coordination as Royalty under Article 12 of India-USA Treaty.
2. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in directing to tax @10% instead of @15% as Fees for included service on the payment received for creative fees and data base cost on amount of Rs. 48,03,630/- as provided for in the Indo-USA DTAA”.
2. Brief facts are that the Euro RSCG Worldwide Inc, New York is a company incorporated under the laws of USA. Assessee is a resident of USA. Accordingly as per section 90(2) of the Income Tax Act, 1961, assessee has opted to be taxed as per provisions of Double Taxation Avoidance Agreement (DTAA) between India and the USA. Euro RSCG Worldwide Inc acts as a communicating interface between multinational clients and various EURO entities each in the region. Euro RSCG Worldwide Inc for some of the key multinational clients of the Euro Group has set up a centralized group of persons who act principally as a communication channel between any local Euro entity and the client. This team is typically serves as a common and centralized point of interaction for the clients. This ensures that the work produced is of an international standard that meets the client’s expectations. Euro Worldwide Inc incurred cost as salaries, overheads etc. in connection with the coordination services being rendered by team to various Euro entities. Since the local Euro entities benefit from the central coordination services, Euro Worldwide Inc charged the local entity for such services. In addition, Euro Worldwide Inc on a need basis provides business development and managerial assistance to the local Euro entities in the region. During the year under consideration assessee has provided certain assistance to Euro RSCG Advertising Private Limited (EARPL) and incurred certain costs on behalf of EARPL and received consideration of Rs. 75,66,780 for the said costs. The Euro RSCG Worldwide Inc has invoiced the following amounts to ERAPL:
