Case Law Details
Bain & Company Inc. Vs DCIT (ITAT Delhi)
ITAT Delhi held that services are rendered without transfer of technical knowledge, skill, know-how, etc. and accordingly the receipts doesn’t qualify as FIS (Fees for Included Services) under Article 12(4)(b) of the India – USA Double Taxation Avoidance Agreements (DTAA).
Facts- The assessee is a non-resident corporate entity and a tax resident of Unites States of America (USA). As stated, the assessee is engaged in the business of providing consultancy services to multinational companies in the field of strategy, performance improvement, organization enhancement, mergers & acquisitions, and private equity. It also provides support services to its subsidiaries for which it is remunerated at arm’s length basis.
AO was of the view that the receipts from consultancy services and reimbursement of expenses are in the nature of FIS in terms of Article 12(4)(b) of the treaty, as, they are consultancy services. He further held that they are in the nature of FIS u/s. 9(1)(vii) of the Act.
Insofar as receipts of reimbursement of expenses are concerned, AO observed that such receipts are also in the nature of FIS/FTS, both under Article 12(4)(b) of the tax treaty as well as under section 9(1)(vii) of the Act. He further observed that not only the services rendered are in the nature of consultancy services, but while rendering such services, the assessee had made available technical know-how, knowledge, skill etc. Further, he observed that similar dispute relating to the aforesaid two receipts arising in assessment years 2011- 12 to 2014-15, assessment years 2016-17 and 2017-18 have been settled by the assessee under the Direct Tax Vivad Se Vishwas Scheme, 2020, which shows tacit acceptability of the additions as FIS/FTS by the assessee. Thus, in the aforesaid premises, AO brought both the receipts to tax under Article 12(4)(b) of the tax treaty. DRP rejected the objections of the assessee.
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