The Mumbai Bench of Income Tax Appellate Tribunal has deleted the addition holding that non-technical services could not be treated as Fee for Included Service(FIS).
In the instant case assessee- AC Nielsen Group was a company registered in New York which had been represented in India through two legal entities, ACNielsen Org Marg Pvt, for customised research services and ACNielsen Research Services Pvt. Ltd for services in the field of commerce, finance etc.
A sum of Rs.15,06,52,986/-was received from Indian entities which were the services exempted under Article 12 of India-USA DTAA. The Assessing Officer (AO) taxed the entire income received from Indian entities, to 50% as Royalty and 50% as Fees for Included Services (FIS) and it was upheld by the Commissioner of Income Tax Appeal(CIT(A)). Later On the assessment order was returned for fresh adjudication to AO by ITAT. The AO taxed the entire amount of Rs. 15,06,52,986/- as Fees for Included Services (FIS). the Commissioner of Income Tax Appeal CIT(A) thereby deleted the addition on appeal.
Paras Savla, who appeared for the assessee submitted that the services had not availed any technical knowledge so could not be taxed as Fees for Included Services. He further submitted that the General Services Agreement (GSA) was not taxable as Fees for Included Services (FIS) as it had not satisfied the available criteria as per Article 12(4) of the India-US DTAA.
Soumendu Kumar, who appeared for the appellant contented that the GSA receipts were taxable in India and the company had availed the technical services which constitute Fees for Included Services(FIS).
The Tribunal Bench of Pramod Kumar (Vice President) and Anikesh Banerji (Judicial Member) deleted the addition as the receipt of GSA agreement was not taxable under Article 12(4) of India-USA DTAA and also held that consultancy services not of technical nature could not fell under “Included Services” after examining the memorandum of the company.
The Tribunal also observed that “The assessee had not executed any contract to make any business. So, to use services independently by applying the technology. All the services undertaken by the assessee or either support service IT enable services; coordination of tax services as rendered above are not stages which request transfer of technology receipts to skill companies.”
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