The tribunal clarified that consultancy and support services do not constitute 'Fees for Included Services' under the DTAA, as they do not make available technical knowledge, thus not taxable in India.

ORDER

PER NAVEEN CHANDRA, AM :-

These two captioned appeals by the assessee are directed against the order u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 [the Act, for short] dated 31.03.2023 for A.Y 2020-21 and dated 28.08.2023 for A.Y 2021-22.

ITA No. 1677/DEL/2023 [A.Y 2020-21]

2. Grounds raised by the assessee read as under:

1.That the Ld. Assessing Officer ('AO') erred on facts and in law in assessing the income of the Appellant at Rs. 144,48,50,120/- vide Final Assessment Order dated 31 March 2023 as against the returned income of Rs.27,57,87,110/- declared by the Appellant.

GROUNDS PERTAINING TO MANAGEMENT CONSULTING SERVICES

2.That the Ld. AO/ Dispute Resolution Panel ('DRP') erred on facts and in law in holding that the fee for management consulting services amounting to Rs.49,79,77,135/-received by the Appellant from Bain & Company India Private Limited, its wholly owned subsidiary (hereinafter referred to as 'Bain India') is in the nature of 'Fees for Included Services' ('FIS') under Article 12(4)(a) of the India-USA Double Taxation Avoidance Agreement ('DTAA') without appreciating that management consultancy services are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement.

3.That the Ld. AO/DRP erred in characterizing management consultancy services as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case.

4. That the Ld. AO/DRP erred on facts and in law in holding that the management consultancy services provided by the Appellant to Bain India under consulting service agreement are FIS under Article 12(4)(b) of the DTAA failing to appreciate that these services are not technical in nature and does not make available' any technical knowledge, know-how, skill, etc. to Bain India as contemplated under the DTAA.

GROUNDS PERTAINING TO REIMBURSEMENT OF THIRD-PARTY VENDORS

5. That the Ld. AO/ DRP erred on facts and in law in holding that the reimbursements of Rs. 11,64,85,266/- received by the Appellant from Bain India under cost reimbursement agreement are in nature of FIS under Article 12(4)(a) and Article 12(4)(b) of the DTAA without appreciating these payments are mere reimbursement of expenses on account of services provided by third party incurred by the Appellant for and on behalf of Bain India, without any mark-up or service element.

6. That the Ld. AO/ DRP erred on facts and in law in holding that the reimbursements of received by the Appellant from Bain India under cost reimbursement agreement are in nature of FIS under Article 12(4)(a) of the DTAA without appreciating that the activities in relation to such reimbursement are not ancillary or subsidiary to the enjoyment of rights/information received by Bain India under the royalty agreement.

7. That the Ld. AO/DRP erred in characterizing the reimbursement on account of third- party vendors as FIS under Article 12(4)(a) of the DTAA for the first time this year, contrary to settled position in preceding years despite there being no change in the facts and circumstances of the case.

8. That the Ld. AO/ DRP erred on facts and in law in not appreciating that the services in relation to such reimbursement are provided by third party vendors which are in the nature of provision of secondary information and are non-technical in nature and does not make available' any technical knowledge, know-how, skill, etc. to Bain India as contemplated under Article 12(4)(b) of the India-USA DTAA.

9. That the Ld. AO/DRP erred on facts and in law in not following the principles of judicial propriety by disregarding the decision of this Hon'ble Tribunal rendered in the case of Bain India wherein it was held that reimbursements made by Bain India to the Appellant on account of third-party vendors are not taxable in India and thus not liable to tax deduction.

GROUNDS PERTAINING TO REIMBURSEME