PCIT Vs Goldman Sachs Services Pvt. Ltd. (Karnataka High Court)
Karnataka HC dismisses Revenue’s appeals – Services to overseas group entities not “FTS” under Section 9(1)(vii) & DTAA
The Revenue filed four appeals u/s 260A against a common order of the ITAT, Bengaluru Bench dated 29.04.2022 in IT(IT)A Nos. 365–369/Bang/2020 relating to A.Ys. 2014-15, 2015-16, 2016-17 & 2018-19, in the case of Goldman Sachs Services Pvt. Ltd.
The core issue before the Court was whether the ITAT erred in holding that payments made by the assessee to its overseas affiliates for certain support & shared-service functions were not “Fees for Technical Services (FTS)” under Section 9(1)(vii) of the Act & the relevant Double Taxation Avoidance Agreements.
Revenue’s contentions
- The services rendered by the overseas entities were technical, managerial, or consultancy in nature;
- The relationship was not that of employer–employee;
- Clauses in the inter-company service agreements (cited at page 68 of CIT(A)’s order dated 19.02.2020) demonstrated that the services had technical content;
- Hence, the payments were taxable in India as FTS both under the Act & under Articles 12 of the respective DTAAs.
High Court’s findings
The Division Bench noted that identical issues had already been decided by coordinate benches of the same Court in:
- DIT (Intl. Taxn) v. Abbey Business Services India Pvt. Ltd. [(2020) 122 taxmann.com 174 (Kar.)], &
- DCIT (Intl. Taxn) v. Flipkart Internet Pvt. Ltd. [(2025) SCC OnLine Kar 16629].
In both cases, it was held that intra-group cost-sharing or reimbursement arrangements-wherein employees of the foreign group entities rendered assistance to the Indian entity without any profit element-constituted an employer–employee (intra-group) relationship rather than a technical-service arrangement. The payments were thus mere reimbursements, not consideration for technical services.
