DCIT Vs AC Nielsen Corporation (ITAT Mumbai)
ITAT Mumbai held that consultancy services not of technical nature cannot treated as Fees for Included Services as per sub-clause 4B of Article 12 of DTAA between India –USA and hence addition unsustainable.
Facts-
The assessee is a company established under the laws of Delaware USA and has registered office in New York. AC Nielsen Group is one of the leading business and information companies in the world and is represented in India through two legal entities namely ACNielsen Org Marg Pvt. Ltd.(in brevity ACNOM) for customized research services and retail measurement services ACNielsen Research Services Pvt. Ltd. (in brevity ACNRS) for rendering services in the field of commercial, financial, accounting and legal, logistics etc. In the year of appeal a sum of Rs. 15,06,52,986/- was received from Indian entities for the services which was claimed exempted under Article 12 of India-USA DTAA.
In the original assessment order, AO taxed entire income, 50% as royalty and 50% as fees for included services (FIS). It was upheld by CIT(A). However, matter has been sent back to the file of AO for fresh adjudication by Hon’ble order of ITAT vide order dated 02.03.2016. The AO has passed order as per the direction of the ITAT on 14.02.2018, taxing entire amount of Rs. 15,06,52,986/- as fees for included services (FIS). The assessee has filed appeal against the order of the ld. AO before the ld. CIT(A). The ld. CIT(A) after considering the order of the ITAT Jurisdictional Bench and the submission of the assessee, accepted the assessee’s claim and dismissed the addition made by the ld. AO. Being aggrieved, the revenue filed appeal before us.
Conclusion-
It is clear that the activities of the assessee is related to the General Service Agreement (GSA) which the assessee was entered in agreement on 02.06.2003. The GSA receipts are not taxable under Article 12(4) of India-USA DTAA. From the memorandum of understanding, it is, obvious that as provided in clause 4B of Article 12 of the India-USA DTAA, that if the technical and consulting services made available are technical knowledge, experience, skill, know how or process or consist the development and transfer of a technical plan or technical design are considered to be technical or consultancy services.
It is also clarified that consultancy services not of technical nature cannot fall under “Included Services”. In view of this memorandum of understanding between two sovereign countries, the consultancy services which are technical in nature alleging to be included as technical and consultancy services for the purpose fees for included service as per sub-clause 4B of Article 12 of DTAA between India –USA.
We have noted that while undertaking the above services, the assessee had not executed any contract to make any business. So, as to use services independently by applying the technology. All the services undertaken by the assessee or either support service IT enable services; co-ordination of tax services as rendered above are not stage which request transfer of technology receipts to skill company. We are fully relied on the order of the coordinate bench in this issue and the addition amount of Rs. 15,06,52,986/- are liable to be deleted.
