IT Support Services rendered by CPP UK from UK to Entire Group Including CPP India Not Taxable as FTS: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that IT support services rendered by CPP UK from the UK to the entire group including CPP India would not be taxable as   Fees for Technical Services (FTS).

The revised return filed by the assessee,CPP Assistance Services Pvt Ltd had undergone scrutiny. The Assessing Officer (AO) noticed that the assessee had paid an amount to its holding company CPP Limited, UK but had not deducted tax at source claiming that Information Support System Services availed by the assessee company would not fall under the definition of FTS under Article 13 of the DTAA and an addition was made to the income of the assessee.

Ajay Vohra, on behalf of the assessee submitted that, IT Support System Support Services would not fall under the definition of FTS under Article 13 of the DTAA since the nature of the services do not fulfil the “make available clause of Article 13(4)(c) of the DTAA relying upon DIT Vs. Guy Carpenter & Co. Ltd. He also contended that the Assessing Officer grossly erred in not appreciating the facts in true perspective.

He further contended that the relevant clauses of the agreement had made it clear that the assessee had no right over the Intellectual Property Right and was simply using the services of CPP UK which could not be termed as “make available’ any technical knowledge or experience as each time the assessee had to approach the system provided by CPP UK to redress the grievance of its customers. 

He also submitted that during the course of rendering of services, the assessee had not gained any technical knowledge, experience, skill etc.

 Sanjay Kumar, on behalf of the revenue, submitted that, “make available” would not be expressly mentioned in the description of the services availed, and, therefore, the agreement between the assessee and CPP Limited, UK do not use the phrase ‘make available’ explicitly. According to him any SOP given out by the UK company to the Indian company would make available the technical processes involved in handling customers.

The Delhi Bench of N.K. Billaiya (Accountant Member) and Yogesh Kumar (Judicial Member) allowed the appeal directing to deleting the addition observing that,

“In light of Article 13(4) of the DTAA, we are of the considered view that unless the recipient of the services is enabled to provide the same services 14 without recourse to the service provider, the services cannot be said to have made available the recipient of services. 24. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology. 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.” 

To Read the full text of the Order CLICK HERE

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