Technical services provided to US residents are taxable in India only if make available condition is fulfilled: ITAT Delhi
Invesco Holding Company (US) Inc. (ITA No.784 & 785/Del/2023)
Facts:
1. The Assessee is a tax resident of the USA and provides Information Technology Application services, IT Infrastructure services and IT security to its associated enterprises (AE)s globally.
2. The case of the Assessee was selected for scrutiny and during the assessment, the Assessee was required to show cause as to why payment received by the Assessee from its Indian AE(s) for rendering IT Services should not be considered as Fees for Technical Services and why should it not be taxable accordingly both under the Act as well as the DTAA.
3. In response, the Assessee clarified that it provided the services described above to not only its Indian AE(s) but also to other Invesco Group Companies located worldwide. Therefore, expenses of the Assessee relating to provision of IT Services is allocated to its AE(s) and the same is recovered from them without charging mark-up.
4. Hence, in the absence of any element of profit in receipts from its Indian AE(s) it is a clear cut case of cost-to-cost reimbursement giving rise to no income on which tax can be charged. In addition, it was also submitted that the IT Services are merely support based services which do not make available technical knowledge, skill, know-how etc.
ITAT held as below:
1. As per Article 12 of the India- USA DTAA, technical and consultancy services are considered included services under paragraph 4(b) if they make available technical knowledge, experience, skill, know- how, or processes, or consist of the development and transfer of a technical plan or technical design.
2. AO had not made any enquiry on his own or relied any provisions of the Master Inter-Company Services Agreement (in short “MSA”) to show that the training to employees of Indian AEs as imparted was of such nature that it “made available”.
3. The assessee only supports and administers IT training and same does not lead to transmission of specialized knowledge or skill.
4. Otherwise too, the fee received by the Assessee is in the nature of reimbursement as it is simply allocation of costs without any mark-up and thus same not be treated as income of the Assessee.
5. In the light of aforesaid, the grounds raised are sustained and the appeals of the assessee are allowed.
The Copy on the order is as under:
1721733274-784 and 785 Invesco
