ACIT Vs BCD Travel Asia Pacific PTE Limited (ITAT Mumbai)
ITAT Mumbai upheld the CIT(A)’s view that payments received by the Singapore-based assessee from its Indian affiliate under a Regional Service Agreement (RSA) are not taxable as “royalty” u/s 9(1)(vi) or Article 12 of the India–Singapore DTAA.
Tribunal noted that the services—covering finance, HR, supplier coordination, technology, & regional management—were rendered from Singapore on a cost-sharing basis, with no transfer of any confidential know-how or intellectual property. It held that the arrangement represented managerial & administrative services, not the imparting of industrial or commercial experience.
Following Van Oord Dredging & Marine Contractors BV & GECF Asia Ltd., the ITAT ruled that applying expertise to render services does not amount to transferring it. Since the assessee had no PE in India, the income constituted business profits taxable only in Singapore. All Revenue appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeals have been filed by the Revenue against separate impugned orders and Cross Objections by the assessee against separate impugned order passed by ld. CIT(A)-55, Mumbai dated 02/04/2025 for the quantum of assessment passed u/s.143(3) r.w.s. 144C.
2. The Revenue, in substance, has raised the following grounds of appeal, common across all the assessment years in question, mutatis mutandis:
1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the amount received by the assessee from its Indian associated enterprise under the Regional Service Agreement (RSA) does not constitute royalty income taxable under section 9(1)(vi) of the Income-tax Act, 1961.
2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that such amount is not royalty within the meaning of clause 3(a) of Article 12 of the India–Singapore Double Taxation Avoidance Agreement (DTAA), ignoring the fact that the services rendered involve information concerning industrial, commercial or scientific experience.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying on the decision of the Hon’ble ITAT, Mumbai Bench in Van Oord Dredging & Marine Contractors BV v. DCIT (111 Taxmann 163), which has not attained finality before the Hon’ble Bombay High Court, and in further relying on other ITAT decisions without appreciating their distinguishable facts.
3. The Revenue, through these appeals, seeks to restore the additions made by the Assessing Officer treating the receipts of the assessee under the Regional Service Agreement as “royalty”, both under domestic law and under Article 12(4) of the India–Singapore DTAA.
