FTS


Cummins Ltd., In re  A.A.R NO. 1152 OF 2011 (dated 12.01.2016) Background: Cummins Limited, UK is a company incorporated in the UK. Cummins Technologies India Limited (CTIL) is a company incorporated in India. CTIL is engaged in the business of manufacture and sale of turbochargers. CTIL purchases turbocharger components directly from third party in UK and US and in relation to such purchases, Cummins Limited provides supply management services vide Material Suppliers Management Service Agreement.  As per the agreement CTIL pays supply management service fees calculated at 5% of the base prices from the suppliers As per the agreement, Cummins Ltd, UK is responsible for following activities: – Finalization of supplier prices from UK and US suppliers and ensuring market- competitive pricing from suppliers; – Ensuring that the approved suppliers have the necessary manufacturing capacities and infrastructure to provide for the raw material requirements; – Assisting in ensuring on-time delivery of components by the suppliers to Cummins India as well as resolution of delivery performance issues with suppliers, if any – Ensuring that suppliers maintain strict compliance with the standards, procedures and processes and support in obtaining response from supplier to any quality control violation issue; and – Performance review of the supplier  Cummins Ltd does not have a permanent establishment (PE) in India in respect of the supply management services as per the provisions of the India-UK Treaty.

‘Managerial services’ do not fall within the ambit of ‘fees for technical services’; not taxable ...


ADIT v WNS North America Inc [ITA No 2944/Mum/2012 (Mum ITAT) dated 31.07.2013] Background: The assessee is a foreign company and tax resident of United State of America. The assessee is inter alia engaged in the business of rendering marketing and management services to WNS Global Services Pvt. Ltd. which is its associated enterprise in India. The assessee has entered into marketing and management services agreementwith WNS India. During the year under consideration the assessee has received an amount of Rs.68,15,11,339 towards marketing and management services rendered by it to WNS India. Since the assessee’s employees visited India for providing managerial services, therefore WNS India constitutes service PE under Article 5(2)(1) of Indo-USA DTAA. Accordingly an amount of Rs.6,52,13,074/- has been attributable to such service PE for managerial service rendered in India and which has been declared by the assessee in its return of income for the year under consideration. 

Management & marketing services do not make available technical services & therefore, not taxable – ...


McKinsey & Company (Thailand) Co. Ltd. v DDIT IT APPEAL NO. 7624 (MUM.) OF 2010 (Mumbai ITAT) Background: The assessee is part of McKinsey group of entities, the primary business of which is to render strategic consultancy services to their clients. The receipts amounting to Rs. 79,99,272 in the instant year for such services rendered by the assessee to its Indian counterpart were claimed as having been performed outside India and since these were rendered in the ordinary course of business, the same qualified to be a ‘business receipt‘. In the absence of the assessee having any Permanent Establishment (PE) in India, it was argued that no incidence of tax arose in India on this account. The AO treated this amount as ‘Fees for technical services’ and hence chargeable to tax under Article 12 of the DTAA. 

In the absence of FTS clause in India-Thailand DTAA, consultancy services cannot be treated as ...



SARGENT & LUNDY v ADIT [ITA No.8986/Mum/2010 (Mum ITAT)] dtd 24.07.2013 Background: The assessee is tax resident of USA. It is a consulting firm engaged in providing services to the power industry by providing engineering based services. The assessee received a sum of Rs.2,22,16,154/- from L&T Limited for rendering consulting and engineering services in relation to Ultra Mega Power projects. The assessee entered into agreement to provide ‘consulting and engineering services’ required by L&T “in the preparation of technical designs” for Ultra Mega Power Projects. L&T was to bid for setting up power projects. It engaged the services of the assessee for technical evaluation and preparation of necessary designs and documents. The assessee did not offer this income in the return on the pretext that such sum was not taxable as the services do not make available technical knowledge, experience, skill or know how within the meaning of FIS as per Article 12(4) of the DTAA between India & USA.  However, the AO held that the services rendered were in the nature of ‘consulting and engineering services in preparation of the technical designs basis in the form of review of designs for Ultra Mega Power Projects and therefore was covered u/s 9(i)(vii) of the Act as well as includible in the scope of ‘Fees for included services’ under Article 12 of the DTAA.

FTS: Services for future use can be regarded as ‘made available’ under Article 12 of ...


ITO v VEEDA CLINICAL RESEARCH PVT LTD ITA No.1406/Ahd/2009 (dated 28 June 2009) – Ahmedabad ITAT Background: During the year, the assessee made payments of GBP 35,600 to Veeda Clinical Research Ltd UK, for providing in-house training of its employees, and of GBP 8,500, made to Steve Matheson UK, for providing market awareness and development training to its employees. The payment was made without deducting tax at source under section 195 of the Act. The Assessing Officer disallowed the same under section 40(a)(i) of the Act. The CIT(A) also upheld the order of the AO.

FTS can be ‘made available’ only if the technology is transferred – Ahd ITAT


CLSA Ltd v ITO (Intl Taxation) [ITA No. 2010 (MUM.) OF 2008 dtd 18.01.2013] (Mum ITAT) Background: Assessee is a Company incorporated in Hongkong and belongs to the CLSA Group of companies. During the year, CLSA India (CLSAI) paid an amount of Rs. 7,73,58,162 to the assessee-company as “Referral Fees”. Before the AO, it was explained that it has business relationship with various financial institutions outside India which required services of a broker in relation to the investment activities carried out by such Institution in Indian capital market. It was submitted that the assessee referred such overseas institutional clients to CLSAI acting as India stock broker for which it received referral fees from CLSAI. The AO held that the fees was in the nature of fees for technical services received by the assessee and the same, therefore, was chargeable to tax in its hands in India.

Referral fees is equivalent to export commission & therefore, cannot be regarded as FTS – ...



Siemens Limited v CIT(A) IT APPEAL NO. 4356 (MUM.) OF 2010 Dtd 12.02.2013 – Mumbai ITAT Background: Assessee hired “Pehla Testing Laboratory” (PTL) of Germany for carrying out “type tests” of the circuit breakers manufactured by assessee in order to establish that the design and the product meets the requirement of the International Standards. Pehala Lab is accredited by National Accreditation Board for Testing & Calibration Laboratories (NABL) Germany, which carries out various kinds of tests for circuit breakers and other electronic devices to prove that the designs of the equipment meets the requirements of the international standards. This is a standard service provided by the Laboratory, which is done automatically by machines. It was submitted by the assessee during the course of assessment proceedings that the payment was purely for standard facility provided by the Laboratory which is done automatically by the machines without any human intervention. Further, the payment is in the nature of business income of PTL and since it does not have any Permanent Establishment in India, the same is not taxable in India as per the DTAA. However, the AO rejected the assessee’s contentions on the ground that the type of the services provided by the Pehla Lab is of highly technical in nature covered by section 9(1)(vii).

Services provided by machines without human intervention cannot be construed as FTS – Mum ITAT


P.T. McKinsey Indonesia v DDIT IT APPEAL NO. 7625 (MUM.) OF 2010 (dtd 16.1.2013) (Mum ITAT) Background: Assessee, a foreign company, engaged in the business of providing Strategic Consultancy Services filed its return of income on 27-10-2007 declaring NIL income. During the assessment proceedings, AO found that assessee had claimed to have received a sum of Rs. 23.41 Lakhs under the head ‘Business Receipts’. AO held that the payments received by the assessee were in the nature of consideration received for rendering of technical and consultancy services so as to make available technical knowledge, skill, know how, experience or process and thus was in the nature of fees for included services as covered by Article 12 of the DTAA between India and Indonesia’.

Provision of data is not Royalty & the same cannot be taxed as ‘Other Income’ ...


Apollo Consulting Services Corporation v DIT [ITA No: 2983 (Mum) of 2010 dtd 27 July 2012] Mumbai ITAT Background: M/s. Apollo Consulting Services Corporation (hereinafter referred to as ACSC) is a non-resident company incorporated in USA. ACSC and IBM (based in USA) had entered into a Global Agreement which is also known as ‘Base Agreement’ on 11.01.2002. By virtue of this agreement, ACSC agreed to provide IBM, USA and its global subsidiaries certain services. In the background of the Base Agreement, IBM India made deal with ACSC through IIC Systems Private Limited, India (hereinafter referred to as ISPL) for the services to be performed in the USA. During the previous year, as per the agreement between IBM India and ISPL, ACSC provided technical manpower to IBM in USA according to its requirements. Thus, the link between the three entities was that, purchase orders are issued by IBM to ISPL who in turn passed that to ACSC. The entire arrangement was for providing skilled manpower in USA. 

Recruitment service is not “Technical Service” – Mumbai ITAT