Case Law Details
Everest Global Inc. Vs DDIT (ITAT Delhi)
Facts- The assessee operates as a global services advisory and research company. Assessee assists corporations in developing and implementing leading edge sourcing strategies including captive outsourced and shared services approaches. The assessee is a LLC registered in United States of America and hence entitled to be governed by the provision of the DTAA between entered into between India and USA.
AO completed the assessment by making an addition on account of management fee and IC Labour Charges received by the assessee in respect of services offered to its wholly owned subsidiary in India, Everest Business Advisory India Pvt. Ltd. under Master Support Service Agreement and Master Consultant Sharing Agreement respectively.
The AO also made addition on account of receipts from third party clients in India in respect of certain services rendered by the assessee to these clients in India such as web promotion, banner ads, development of whitepapers which are available for download by registrants for free etc. The AO treated management fee and IC Labour Charges as fee for technical services/fee for included services (“FTS”/”FIS”) under the Act as well as under the India-USA DTAA. As regards receipts from third parties, the AO held these receipts to be taxable as royalty/ FTS/ FIS in the alternative under the Act as well as India-USA DTAA.
Conclusion- The IC labour charges received by the assesee from Everest India is not taxable as FIS under the provisions of Article 12(4)(b) of the India-USA DTAA. This is for the reason that there is no rendition of technical or consultancy services by the assesee through the supply of manpower which has enabled Everest India to apply any technical knowledge, experience, skill, know-how on its own without the recourse to the manpower supplied by the assesee. The agreement is continuous in nature and the lending entity is free to withdraw the manpower resource if it requires the resource for its own business. The objective of agreement is not to make Everest India self equipped/self sufficient for future.
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