Payments made to UK company under Shared Services Agreement are not Taxable as Royalty: ITAT Mumbai

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Payments made to UK company under Shared Services Agreement are not Taxable as Royalty: ITAT Mumbai


Deloitte Haskins & Sells LLP & Anr. (ITA Nos. 201 to 233/Mum/2021, 4800 to 4804, 4810 to 4814, 4744, 4775 to 4782/Mum/2019)


  1. The assessee made payments to Deloitte Global Holdings Ltd (registered in UK) under the Shared Services Agreement, which is essentially an agreement for rendering services within the Deloitte network.
  1. The AO while deciding on the application filed U/S 195(2) of IT Act by the appellants for issuance of certificate for no deduction of tax, for the AY 2018-19 and 2019-20, held that payments to the extent they were relatable to, (1) Global brand; (2) Global Communications; and (3) Global Technology/Knowledge Management, were in the nature of royalties, being payments for use of computer software/literary work.
  1. The assessee maintained that the information utilised/provided in the course of rendering these services is not of confidential or secret in nature but is published information available in public domain. Therefore, such a payment cannot be regarded as consideration for imparting of any information concerning commercial or knowledge, experience or skill as contemplated in the definition of royalty as contained in clause (iv) of Explanation 2 to section 9(1)(vi) or under article 11(3)(a) of the India-UK tax treaty.

ITAT Mumbai held as below:

  1. Deloitte Global Holdings Ltd only perform various activities for its members and its guidance is only for internal use by the member firms. So payment for such services cannot be considered for information concerning industrial, scientific or commercial experience.
  1. There is no transfer of intellectual property by Holdings to the appellants and also there cannot be a case of giving industrial, commercial or scientific equipment.
  1. Thus, the payments made for global brand cannot be treated as in the nature of Royalty as per Article 13(3) of India-UK DTAA. Another important thing is that the payment is also not for any use of trademark/patent.

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