DCIT Vs Deloitte Haskin & Sells LLP (ITAT Mumbai)
Global Brand, Communications & Tech Services Aren’t “Royalty”: ITAT Mumbai Dismisses Revenue Appeals in Deloitte Case
Mumbai ITAT dismissed multiple appeals filed by the Revenue and upheld the relief granted by the CIT(A).
The dispute revolved around payments made by Deloitte India entities to Deloitte Global Holdings Services Ltd., UK under a Shared Services Agreement, towards Global Brand, Global Communications and Global Technology / Knowledge Management services. The AO had treated these payments as “royalty” under Article 13(3) of the India–UK DTAA, alleging use of copyright, commercial experience or technology, and accordingly held that tax was required to be deducted u/s 195. The CIT(A) disagreed and directed refund of taxes deducted.
The Tribunal noted that the issue was squarely covered by a series of earlier ITAT decisions in Deloitte’s own case, where identical payments under the same agreement were held not to be royalty. On merits, the ITAT held that:
- Global Brand & Communications services are in the nature of internal guidance, coordination and policy alignment, without any transfer of trademark, copyright or confidential know-how.
- Global Technology / Knowledge Management involves providing access to licensed software and systems for internal use, which amounts to transfer of a copyrighted article, not copyright itself, squarely covered by the Supreme Court ruling in Engineering Analysis Centre of Excellence.
- The expression “information concerning industrial, commercial or scientific experience” cannot be stretched to cover routine managerial or support services rendered within a professional network.
The Tribunal also noted that reliance placed by the AO on the AAR ruling in EY Global Services Ltd. was misplaced, as the same has since been reversed by the Delhi High Court. Consistency in judicial approach and absence of any change in facts further weighed against the Revenue.
Accordingly, the ITAT held that the impugned payments do not constitute royalty, are not chargeable to tax in India, and therefore no TDS obligation u/s 195 arises. All Revenue appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
