M/s B.G. India Energy Solutions P Ltd Vs DCIT (ITAT Delhi)
Conclusion: Where services provided by employees of BGIL were merely in the nature of routine support services, the same could not be termed as ‘FTS’ under Article 13 of the India UK DTAA, therefore, there was no requirement for assessee to deduct taxes from such payments in India u/s 195.
Held: In the instant case, assessee-company claimed an amount that was in the nature of provision for ‘time writing charges’ based on estimated time cost of employees of assessee-company’s sister concern BGIL. AO held that TDS had not been deducted on the said provision since the payments were in the nature of fee for technical services and therefore, completed assessment proceedings against the assessee. Tribunal observed that ‘make available’ means the person acquiring the services was enabled to apply technology contained therein on his own in future without recourse to the service provider which meant that the knowledge must remain with the service recipient once service had ended and thereafter, service recipient was at liberty to use the technical knowledge, skill know-how and processes. Thus, the service provided by employees of BGIL were merely in the nature of routine support services and, therefore, could not be termed as ‘FTS’ under Article 13 of the India UK DTAA. Therefore, there was no requirement for assessee to deduct taxes from such payments in India u/s 195.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is preferred against the order of the dated 16.12.2014 framed u/s 144C of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] pertaining to assessment year 2010-11.
2. Ground No. 1 is general in nature and needs no separate adjudication.
3. Ground Nos. 2 to 4, with all its sub grounds, relates to the adjustment of Rs. 1,45,06,572/- made on account of disallowance of payment of management services and unit charges [MSU charges] by the assessee to its AEs.
4. Briefly stated, the facts of the case are that the appellant-company is a wholly owned subsidiary of BG Asia Pacific Holdings Pvt Limited. It commenced midstream gas marketing operations in India after obtaining the approval of the Foreign Investment Promotion Board [FIPB] of the Government of India to undertake marketing and distribution of natural gas as well as LNG.
5. The assessment year under consideration was the first year of purchase and sale of LNG operations. The international transactions reported by the appellant company are as under:
