Rendering Investment Advisory Services related to Investment by Non-Resident Group Companies Amounts to Advisory Service: Delhi HC directs to Refund ITC [Read Order]
Rendering Investment Advisory Services related to Investment – Non-Resident Group Companies Amounts to Advisory Service – Delhi HC – Refund ITC – TAXSCAN
Rendering Investment Advisory Services related to Investment – Non-Resident Group Companies Amounts to Advisory Service – Delhi HC – Refund ITC – TAXSCAN
The Delhi High Court has held that rendering investment advisory services related to investment by non-resident group companies amounts to advisory service and directed to refund of Input Tax Credit (ITC).
M/s Cube Highways and Transportation Assets Advisor Private Limited, the petitioner has filed the petitions impugning the orders passed by the Appellate Authority (respondent no.2) rejecting the appeals preferred by the petitioner against the orders passed by the Adjudicating Authority (respondent no.1).
The question before the court is whether the services rendered by the petitioner to I Squared Asia Advisors Pte. Ltd., a company having its principal place of business in Singapore (I Squared) in terms of the Amended Support Service Agreement constitutes the export of services.
The petitioner claimed that the services rendered by it are export of services because I Squared, the service recipient, is located overseas. However, the respondent authorities have held that services provided by the petitioner do not qualify as ‘export of services’ as the place of supply of services is in India.
The petitioner is a company engaged in the business of rendering investment advisory services related to the investment by non-resident group companies in the target companies in India, which are engaged in the transportation sector. The petitioner and I Squared belong to the same group of companies. The petitioner had entered into a Support Service Agreement on 30.05.2015 with I Squared.
The scope of services to be provided under the said agreement was subsequently altered, therefore, the said agreement was terminated and the parties (the petitioner and I Squared) entered into the Amended Support Service Agreement on 06.06.2015 (the Agreement). In terms of the Agreement, the petitioner agreed to provide Advisory Support Services as mentioned in the Agreement, the parties agreed that the petitioner would be remunerated at an arm’s length price to be determined on a cost-plus markup basis.
The services rendered by the petitioner were accepted as ‘export of services’ by the Revenue under the Finance Act, 1994 (Pre-GST Regime) and the Input Tax Credit (ITC) was refunded to the petitioner as claimed. The petitioner filed its applications for refund of unutilized ITC for the financial years 2018-19 to 2020-21, which were rejected.
The Adjudicating Authority issued a show cause notice to reject the petitioner’s claim for refund. The petitioner filed an appeal under Section 107 of the CGST Act before the Appellate Authority which was rejected by an order dated 29.03.2022. The Appellate Authority noted the scope of services as specified under Article 3 of the Agreement and observed that the petitioner was engaged in providing support services on behalf of I Squared regarding information on the Indian market for identifying potential opportunities/customers.
The Appellate Authority also observed that the petitioner was providing services to customers of the service recipient and held that the petitioner was an ‘Intermediary’ under Sub-section (13) of Section 2 of the IGST Act. Thus, the services rendered were considered to be ‘Intermediary Services’.
A division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan viewed that the petitioner is rendering advisory services to I Squared and it had also explained that its overseas group company [I Squared] is not bound by its advice and takes its own decision at its discretion as expressly stated in the Agreement. The petitioner also provided invoices indicating that it was charging “market services and advisory fee”.
The Court set aside the impugned order and further observed that no material would even remotely suggest that the services rendered by the petitioner are not as claimed, that is, advisory services relating to investments in India.
The Adjudicating Authority is directed to process the petitioner’s claim for refund as expeditiously as possible and preferably within eight weeks from today.
To Read the full text of the Order CLICK HERE
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