Concentrix CVG Customer Management Group Inc. Vs DCIT (ITAT Delhi)
Assessee, a US tax resident, provides customer & marketing support services to global clients, with its Indian subsidiary Convergys India Services Pvt. Ltd. (CIS) offering IT-enabled back-office/call centre services on a cost-plus basis. Revenue alleged that employees of the Assessee frequently visited CIS premises, exercising control & supervision, thereby creating Fixed Place PE, Service PE & Dependent Agent PE in India. AO also treated IPLC/link charges as royalty. Additions were made attributing large profits to India.
CIT(A) partly upheld AO by holding existence of Fixed Place PE but rejected Service PE & Dependent Agent PE. He also ruled link charges not taxable as royalty. In earlier round, Tribunal partly upheld attribution; on further challenge, Delhi High Court remanded matters back in 2015 for fresh adjudication.
Tribunal’s Findings
- Fixed Place PE: Following SC ruling in E-Funds IT Solutions (399 ITR 34) & Formula One (394 ITR 80), Tribunal held that mere outsourcing to CIS or close association does not amount to Assessee having a place “at its disposal” in India. No business was conducted by Assessee in India; CIS only rendered support services. Hence, no Fixed Place PE.
- Service PE: Assessee’s clients were all outside India; no services were rendered within India. Employees deputed worked under CIS’s control. Tribunal, relying on E-Funds & Morgan Stanley (292 ITR 416), affirmed no Service PE.
- Dependent Agent PE: CIS acted on principal-to-principal basis, had no authority to conclude contracts on Assessee’s behalf. Thus, no DAPE under Article 5(4) of India-US DTAA.
- Attribution of Profits: With no PE, there could be no attribution of business profits to India. Profit attribution orders from first round set aside.
- Link/IPLC Charges: Payments for telecom circuits were held as mere reimbursements for services, not involving any transfer of equipment rights. Tribunal followed its earlier orders & Delhi HC ruling in New Skies Satellite BV. Held not taxable as royalty under Article 12 of DTAA.
- DIN, 234A/234B Interest, Penalty u/s 270A: Grounds dismissed as consequential or premature.
- MAP Grounds: For AY 2022-23, Tribunal held that since MAP was concluded in 2017, it was non-binding in later years; relief granted to Assessee.
Following SC ruling in E-Funds IT Solutions (399 ITR 34) & Formula One (394 ITR 80), Tribunal held that mere outsourcing to CIS or close association does not amount to Assessee having a place “at its disposal” in India. No business was conducted by Assessee in India; CIS only rendered support services. Hence, no Fixed Place PE.
