Crocs Inc. Vs ACIT (ITAT Delhi)
Background: Assessee, Crocs Inc., a U.S.based company, provided administrative & support services to its Indian affiliate, Crocs India Pvt. Ltd., under a service agreement . For AY 2019–20, Crocs Inc. filed a return declaring NIL income, claiming that the service income was not taxable in India under the India-USA DTAA (Article 12). However, the AO treated the service income of ₹13.74 crore as Fee for Technical Services (FTS) u/s 9(1)(vii) & taxed it accordingly. Assessee’s objections before the DRP led to a direction for factual reconsideration, but the AO, in the final assessment, again held the income as taxable FTS. The assessee appealed to the ITAT.
Key Issues involved
1. Whether the services provided were “technical” in nature & therefore taxable in India u/s 9(1)(vii).
2. Whether the services satisfy the “make available” condition under Article 12(4) of the India–USA DTAA.
3. Whether the services are exempt from tax in India based on the DTAA override provision u/s 90(2).
Assessee’s Arguments
- Services were general administrative & support in nature (e.g., planning, logistics, IT, HR, legal, etc.) & did not involve transfer of technical know-how.
- The services were not “made available” to Crocs India in a way that it could perform them independently in the future.
- Income should not be taxed as FTS under the India–USA DTAA, which requires the “make available” test to be satisfied.
- Cited multiple precedents (e.g., Infobip Ltd., Bio-Rad Labs, Guy Carpenter, De Beers, Intertek Testing Services) supporting non-taxability when “make available” clause is not met.
Department’s Arguments
- Argued that services provided were technical in nature, involving skilled personnel & specialized knowledge.
- Relied on earlier rulings (Mahindra & Mahindra, CEVA Asia Pacific, Foster Wheeler, US Technology Resources) where similar services were held to be taxable.
- Asserted that services like planning, accounting, legal, IT, & HR are technical or consultancy services falling within the scope of FTS u/s 9(1)(vii).
Tribunal’s Findings:
