Case Law Details
DCIT Vs CPP Assistance Services Private Limited (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi, dismissed two appeals filed by the Revenue against the orders of the National Faceless Appeal Centre (NFAC) in the case of DCIT vs. CPP Assistance Services Private Limited. The case involved tax assessment orders for the financial years 2017-18 and 2019-20 under Section 143(3) read with Section 144B of the Income Tax Act, 1961. The primary issue revolved around payments made by the assessee to its non-resident group company in the UK, which the Revenue contended should be taxed as fees for technical services under Article 13 of the India-UK Double Taxation Avoidance Agreement (DTAA).
The Tribunal noted that the issue had been previously examined in the assessee’s own case for the assessment year 2017-18 by a coordinate bench. In that instance, the bench ruled that the payments in question did not meet the “make available” criterion under the India-UK DTAA. Specifically, it was observed that the services rendered by the UK-based CPP Group involved IT support that did not transfer any technical knowledge, experience, or skill to the assessee. This conclusion was based on the nature of the agreement, which showed no evidence that the technical know-how or expertise was imparted to the Indian entity.
Judicial precedent played a pivotal role in this ruling. The ITAT referred to its earlier decision, which clarified that recurring IT support services provided by the UK entity did not qualify as making technical knowledge “available” under Article 13. The agreement was perpetual, and the Indian entity continued to rely on the UK entity for these services, further supporting the conclusion that no technical transfer occurred. The earlier decision also directed the deletion of a disallowance of ₹5.46 crores on similar grounds.
In the current case, the ITAT found no material deviation from the facts and legal principles established in the earlier assessment year. The Revenue could not provide substantive arguments to challenge the findings of the NFAC or the coordinate bench’s decision for the previous year. Consequently, the ITAT upheld the NFAC’s orders and dismissed the appeals.
This decision underscores the significance of the “make available” criterion in determining the taxability of technical services under DTAA provisions. The Tribunal reiterated the importance of examining the nature of services and agreements while applying international tax treaties, relying on both the facts of the case and established judicial precedents.
Key Takeaway: The ITAT’s ruling reinforces that recurring IT support services that do not result in the transfer of technical know-how, experience, or skills fail to meet the “make available” standard under Article 13 of the India-UK DTAA.
FULL TEXT OF THE ORDER OF ITAT DELHI
These appeals are preferred by the Revenue against the orders dated 12.02.2024 and 22.02.2024 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal Nos.NFAC/2017-18/10019957 and NFAC/2019-20/10181022 arising out of the appeal before it against the orders dated 05.05.2021 and 26.09.2022 passed u/s 143(3) r.w.s. 144B and u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively, by the DCIT, Circle 4 (2), New Delhi (hereinafter referred to as the Ld. AO).
2. Heard and perused the record.
3. The ld. Sr. Counsel, Shri Ajay Vohra pointed out that the issues raised in the appeals of the Revenue have already been considered in AY 2017-18 by the coordinate Bench, vide ITA No.116/Del/2022, order dated 22.12.2022. The ld. DR could not dispute this submission.
4. After going through the impugned orders and the grounds raised by the Revenue, we find that the ld. DRP had merely followed the AY 2017-18 findings. The issue primarily involved is if the payment which were made by the assessee to the tune of Rs.14,56,35,000/- (A.Y. 2018-19) and Rs.14,71,82,129/- (A.Y. 2020-21) to its non-resident group company were as fee for technical services as per Article 13 of the India-UK DTAA. We find that in AY 2017-18, for the same set of services the coordinate Bench had examined the nature of services availed by the assessee company and found that the ‘make available’ criteria was not fulfilled. The coordinate Bench had examined the agreement between the CPP group, UK (the supplier) and the CPP Assistance Services Pvt. Ltd. (the assessee) and in the following observations in para 32-34, it was held that the ‘make available test’ is not satisfied:-
“32. Whereas the facts of the case in hand show that the assessee does not gain any technical knowledge, experience or skill as it is not involved in the process that service provider is following while rendering the services. The IT support services are rendered by CPP UK from UK itself and these services are rendered for the entire group and not just for CPP India.
33 The agreement between CPP group services and the assessee is perpetual and such services are provided by CPP group on recurring basis to the assessee and if the technical knowledge, skill etc. is being made available to the assessee, then there would be no need for the assessee to take recourse to the CPP UK for these services.
34. In our considered opinion, IT support services do not satisfy the make available test as no technical know-how, skill etc were transferred to the assessee. Considering the facts of the case in totality, in light of judicial decisions discussed hereinabove, we direct the Assessing Officer to delete the disallowance of Rs. 5,46,31,534/-“
5. We find no reason to differ on any question of fact or law as examined by the CIT(A), while following the decision of the coordinate Bench in the appellant’s own case for AY 2017-18 (supra). The grounds of the Revenue have no substance.
6. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 07.11.2024.
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