Case Law Details
Edenred Pte Ltd Vs DDIT (ITAT Delhi)
The issue under consideration is whether income tax levied on revenue received from IDC agreement, management agreement, and referral agreement as per the India-Singapore DTAA?
In the present case, during the assessement the AO, after incorporating the direction of the DRP passed a final assessment order by taxing (i) IDC charges as royalty as per provisions of the Act and the India-Singapore DTAA, (ii) management charges as Fees for Technical Services (‘FTS’) as per provisions of the Act and the India-Singapore DTAA and (iii) referral fees as royalty as per provisions of the Act and the India-Singapore DTAA and as FTS as per provisions of the India-Singapore DTAA.
ITAT states that it is relevant to mention here that as per the India-Singapore DTAA, the services in the nature of managerial, technical or consultancy nature are taxable as FTS, if such services are ‘made available’ to the service recipient. In the instant case, referral services/other services are provided to support Surf Gold in carrying on its business. These services do not make available any technical knowledge, skill, knowhow or processes to SurfGold because there is no transmission of the technical knowledge, experience, skill etc. from the appellant to SurfGold or its clients. Further, the Tribunal referred the decision in Knight Frant (India) (P.) Ltd.wherein the Tribunal held that (i) where referral fees were received by foreign concern for introducing clients to the assessee-Indian company, providing international real estate advisory and management services since referral services were rendered entirely outside India, it would not fall within the scope of ‘total income’ of said foreign concern as per section 5(2) and (ii) referral fees paid by the assessee-Indian company for availing referral services which were rendered by foreign concern entirely in the USA would constitute business profits of a foreign company under Article 7 of the India-USA DTAA; in absence of PE in India, it was not taxable in India.
The distillation of precedents must now be applied by us to the facts of the present case. Therefore, ITAT are of the considered view that in the context of the above factual scenario and position of law, the revenues under the referral and Management agreement is not taxable in the hands of the appellant as royalty under the Act and/or India-Singapore DTAA or FTS under the India-Singapore DTAA. Therefore, they delete the addition made by the AO.
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