ORDER
Sanjay Awasthi, Accountant Member. – This appeal arises from order dated 18.12.2024, passed by Ld. DCIT/ACIT, International Tax, Gurgaon. This order has been passed u/s 143(3) of the Income Tax Act, 1961 (hereafter “the Act”), r.w.s. 144C(13) of the Act.
1.1 The assessee is a foreign company having tax residency of the USA. The assessee is engaged in the business of providing consultancy services which include areas such as strategy, performance improvement, organization enhancement, mergers&acquisitions and private equity. The assessee also provides support services to its subsidiaries for which it is compensated. The main points of contention in this appeal pertain to receipts for consultancy services provided to BAIN India at Rs.86,80,47,511/-. Secondly, receipts on account of professional support services provided to BAIN India at Rs.47,98,96,089/-, is also in dispute. The third controversy is regarding the receipt of subscription fee for providing excess to third parties to the NPS Prism Platform (Rs.57,45,100/-), maintained by the assessee. It is seen that the Ld. AO, following the DRP’s directions, added Rs.86,80,47,511/- on the ground that such consultancy and professional support services are ancillary or subsidiary to enjoyment of rights/information received under the royalty agreement. An addition of Rs.47,98,96,089/- has been made on the ground that the receipts are in respect of consultancy services which are Fee for Included Services (FIS) under the India US DTAA. Regarding the issue of subscription fee received from M/s Kotak and M/s Zonka the impugned amount has been added on the reasoning that such receipts deserve to be treated as royalty income as per the Act and also as per the relevant tax treaty.
1.2 The aggrieved assessee has approached the ITAT with the following grounds of appeal: –
“1. That the Ld. Assessing Officer (‘AO’) erred on facts and in law in assessing the income of the Appellant at Rs.1,83,09,55,077/- vide Final Assessment Order dated 18 December 2024 as against the returned income of Rs.47,72,66,377/- declared by the Appellant.
2. That in facts and circumstances of the case and in law, the impugned assessment order passed by the Ld. AO is bad in law and liable to be quashed as the Appellant was not provided an opportunity of being heard, as per provisions of Section 127 of the Income-tax Act, 1961 (the ‘Act’), before jurisdiction of this case was transferred from the Assistant Commissioner of Income Tax/ Deputy Commissioner of Income Tax (International Taxation), Circle-1(1)(1), Delhi, to the office of the Ld. AO (Assistant Commissioner of Income Tax- International Tax, Circle-Gurugram).
GROUNDS PERTAINING TO MANAGEMENT CONSULTING SERVICES
3. 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.86,80,47,511/- received by the Appellant from Bain & Company India Private Limited, its wholly owned subsidiary (hereinafter referred to as ‘Bain India’), pursuant to Consulting Service Agreement (‘CSA’) is liable to tax in India as ‘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.
4. That the Ld. AO/DRP erred in characterizing management consultancy services as FIS under Article 12(4)(b) of the DTAA contrary’ to settled position in Appellant’s own case in preceding years, despite there being no change in the facts and circumstances of the case.
5. 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 CSA are FIS under Article 12(4)(b) of the DTAA failing to appreciate that these services are not technical in nature as contemplated under the DTAA and do not ‘make available’ any technical knowledge, know-how, skill, etc. to Bain India.
GROUNDS PERTAINING TO SUPPORT SERVICES
6. That the Ld. AO/DRP erred on facts and circumstances of the case and in law in holding that the payment received for provision of support services under the Support Service Agreement OSSA’) amounting to Rs.47,98,96,089/- is FIS under Article 12(4)(a) of the DTAA without appreciating that these 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 support services as FIS under Article 12(4)(b) of the DTAA contrary to settled position in Appellant’s own case in preceding years despite there being no change in the facts and circumstances of the case.
8. That the Ld. AO/DRP erred in characterizing the support services as FIS contrary’ to the finding given by Ld. CIT(A) in Bain & Company India Private Limited’s case for AY 2009-10 that the professional support services provided by the Appellant are not in nature of FIS, which has attained finality in the absence of any appeal filed by the Revenue.
9. That the Ld. AO/ DRP erred on facts and in law in concluding that the support services provided by the Appellant to Bain India under the SSA are consultancy in nature.
10. That the Ld. AO/DRP erred on facts and in law in holding that the support services provided by the Appellant to Bain India under the SSA are FIS under Article 12(4)(b) of the DTAA failing to appreciate that these services are not technical in nature do not ‘make available’ any technical knowledge, know-how, skill, etc. to Bain India as contemplated under the DTAA.
GROUNDS PERTAINING TO SUBSCRIPTION CHARGES
11. That the Ld, AO/DRP erred on facts and in law in holding that the amount of Rs.57,45,100/-, received by the Appellant from Kotak Mahindra Bank Limited and Zonka Technologies Private Limited in relation to subscription fee for NPS Prism Platform is liable to tax in India as royalty income under the provisions of Section 9(1)(vi) of the Act and Article 12(3) of the India-USA DTAA.
MISCELLANEOUS GROUNDS
12. That the Ld. AO/DRP erred on facts and in law in holding that since the Appellant has accepted similar additions in the past while opting to settle the past years’ appeals under Direct Tax Vivad Se Vishwas Scheme, this amounts to tacit acceptance of the position taken by Ld. AO on part of the Appellant.
13. That the Ld. AO erred on facts and in law in charging interest under the provisions of the Act.
14. That the Ld. AO has erred on facts and in law by not providing credit for tax deducted at source on the interest granted under section 244A on refund of income-tax payable to the Appellant.
15. That the Ld. AO erred on facts and in law in initiating penalty proceedings under section 274 read with section 270A of the Act.
The Appellant craves leave to add, alter, amend, and/or modify any of the above grounds of appeal at or before the time of hearing of the appeal.”
2. The Ld. AR argued with the help of several paper books and written submissions. Right at the outset, it was mentioned that while ground 1 was general in nature, ground 2 was not being pressed. Regarding ground nos. 3 & 5 challenging the addition of Rs.86,80,47,511/- (consultancy services), it was argued that Article 12(4)(a) of DTAA does not apply to the facts of the present case regarding the impugned amount of consultancy services. It was pointed out that this issue is covered in favour of the assessee by the decisions rendered in their own case for AYs 2018-19 [ITA 567/Del/2022, dated 29.08.2023/Bain & Company Inc. v. Deputy/ACIT, International Taxation (Delhi – Trib.)]; AY 2019-20 [Bain & Company, Inc. v. Dy. CIT, Int.Taxation [IT Appeal No. 1620 (Del) of 2022, dated 12.10.2023]; AY 2020-21 [ITA 1677/Del/2023 dated 22.08.2025].
2.1 Regarding the issue of addition of Rs.47,98,96,089/- as consideration for support services pertaining to grounds 6 to 10 of Form 36, the Ld. AR argued that the Article 12(4)(a) of the India US DTAA was not applicable to this amount. In fact, the Ld. AR pointed out that the arguments relevant for consultancy services would apply here also. It was then pointed out that this issue is also in favour of the assessee through ITAT’s order in assessee’s own case for AYs 2019-20 (supra), 2020-21 (supra) and 2021-22 (supra). It was averred that the facts remain identical as compared to the earlier years and hence, the decision rendered by the ITAT would apply here also.
2.2 Regarding ground no.11 pertaining to subscription fee, it was pointed out that in the Appellant’s own case for AY 2021-22 (supra), the issue has been decided in favour of the assessee and since the facts are identical to the earlier year, hence, the decision rendered by the coordinate bench of ITAT would apply here also.
2.3 The Ld. AR stated that grounds 13 & 15 are consequential in nature and do not require any specific adjudication. However, ground no.14 pertaining to grant of TDS credit of Rs.22,66,691/- deserve the consideration of this Bench. The Ld. AR read out from the submissions filed before us as under: –
“75. It is submitted that during the relevant assessment year, the Appellant had received income tax refund for AY 2020-21, amounting to INR 9,08,12,942/- along with interest of INR 54,48,776/-. The tax of INR 22,66,691/- was withheld on the interest paid to the Appellant [@41.6%]. This is reflected in the annualinformation statement of the subject assessment year. However, since the same was not reflected in Form26AS, the Ld. AO did not grant its credit to the Appellant. At the same time, since the income of INR54,48,776/- was not reflected in Form 26AS, it was not offered to tax by the Appellant in the field return ofincome.
76. It is a settled law that refund cannot be withheld merely because the deducted tax is not reflecting in Form26AS, as long as it can be shown the tax has indeed been deducted. Reliance is placed on the decision ofHon’ble High Court of Allahabad in U.P. Rajya Nirman Sahakari Sangh Ltd. v. UOI (Allahabad) in this regard wherein it has been held as follows:
“8. In light of the above judgments and the circular, we are of the view that a taxpayer shouldnot be left at the mercy of an Assessing Officer who chooses to delay the payment of genuine refunds. Furthermore, as Ions as the assessee is able to provide documents proving that taxhas been deducted at source, the same has to be accented by the Assessing Officer, who cannotinsist that the amount match the figures in Form 26AS. It is the responsibility of the Assessing Officer to verify the amounts provided by the assessee through the proof of Form 16A.
9. In light of the same, we are of the view that the assessee in the present case is entitled to receivea refund of the amounts once the I6A forms are accepted by the Income Tax Authority. Tofacilitate the entire process, we direct the petitioner to appear before the respondent No. 3 on28.10.2025 at 11:00 AM at the office of the respondent No.3.”
77. In light of the above stated facts and the law, it is prayed that the appropriate directions may be given to theLd. AO to consider INR 54,48,776/- as the Appellant’s income while computing the taxable income of thesubject assessment year and also grant the due credit of taxes of INR 22,66,691 /- deducted on the interestincome of INR 54,48,776/-.”
2.4 Regarding ground no.12, the Ld. AR stated that the Ld. AO observed that since the assessee had opted for settlement under the Driect Tax Vivad se Vishwas Scheme for AYs 2011-12 to 2014-15 and AYs 2016-17 to 2017-18, the Ld AO has presumed that the issue so settled amounted to acceptance of the Revenue’s stand.The Ld. AR relied on the written submissions as under: –
“71. The Ld. AO while passing the assessment order, observed that since the Appellant has opted for settlement under the Direct Tax Vivad se Vishvas Scheme for AY 2011-12 to AY 2014-15, AY 2016-17 & AY 201718 (in relation to payments received under CSA and reimbursement of expenses incurred for third party service providers) shows tacit acceptability of the additions by the Appellant on the above issues.
72. At the outset, it is submitted that in Appellant’s own case for AY 2019-20 this Hon’ble ITAT in order dated 12 October 2023 passed in ITA No. 1620/Del/2022 has considered the objection raised by the department and negated the said argument. (refer para 20-21 of the said order on pages 33-34 of the paper book)
73. The Hon’ble ITAT took note of CBDT Circular 9/2020 dated 22 April 2020, wherein it is specified as under:
“Explanation to section 5: For the removal of doubts, it is hereby clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a party in appeal or writ petition or special leave petition to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.”
“Question No. 55: The appellant has settled the dispute under Vivad se Vishwas in an assessment year. Whether it is open for Revenue to take a stand that the additions have been accepted by the appellant and hence he cannot dispute in future assessment years?
Answer: Please refer to answer to question no. 52. It has been clarified in Explanation to section 5 that making a declaration under Vivad se Vishwas shall not amount to conceding a tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.”
74. In light of the above, the Appellant humbly submits that forming an opinion based on settlement of litigationunder the DTVSV Act is grossly misreading the provisions of the DTVSV and reading down on the intentwith which such Act had been enacted.”
3. On the other hand, the Ld. DR forcefully relied on the findings given by the Ld. DRP and the Ld. AO. He stated that the India-US DTAA has been correctly interpreted against the assessee by the authorities below.However, the Ld. DR fairly mentioned that there was no difference in facts as compared to the earlier years’ orders in favour of the assessee, which have been sought to be relied on by the Ld. AR.
4. We have carefully considered the rival submissions and have gone through the documents before us. It is seen that the grounds 3 to 5 pertaining to consultancy services have been decided in favour of the assessee in its own case for AY 2018-19 as under:
“16. So firstly it has to be seen whether the services rendered are of the nature of technical or consultancy. To understand the true import of the expression of technical or consultancy, it is necessary to refer to the Memorandum of Understanding to the Tax Treaty. As per the Memorandum of Understanding, Article 12 includes only certain technical and consultancy services. Technical services would mean, services requiring expertise in a technology. Whereas, consultancy services would mean advisory services. The categories of technical and consultancy services are to some extent overlapping, because, a consultancy service could also be technical services. However, the category of consultancy services also includes an advisory service, whether or not expertise in technology is required to perform it. The nature of services provided under the agreement, such as, client engagement, market research, strategic research and planning etc., in our view, certainly, do not fall under the category of technical services.
17. Further, even assuming that they fall under the category of consultancy services, however, the most crucial condition to be satisfied to qualify as FIS under Article 12(4)(b) is the make available condition. In the facts of – the present appeal, the departmental authorities have not brought any material on record to demonstrate that while rendering services, the assessee had made available technical knowledge, expertise, skill, knowhow etc. to Bain India to apply such technology, knowhow etc. independently without the aid and assistance of the assessee. The fact that Bain India is still dependent on the assessee for such services is established from the fact that since the year 2010, the assessee had been providing such services to Bain India on year to year basis. Had assessee made available the technical knowledge, knowhow skill etc. to Bain India, there would not have been any occasion for the assessee to provide such services on yearto year basis as the making available or transfer of such technical knowledge, knowhow, skill etc. would have enabled Bain India to apply them on its own without requiring the assessee to continue with providing them.
18. It is further relevant to observe, as per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receipt cannot be treated as FTS merely because the service provider while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, keeping in perspective the aforesaid factors as well as the ratio laid down in the judiciary precedents cited before us, we have no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA. We order accordingly.”
This finding has been followed right up to the decisions rendered in AY 2021-22 (supra). Respectfully following the decisions rendered in earlier years by the ITAT it is held that no addition can be made of Rs.86,80,47,511/-.
4.1 Regarding the ground nos. 6 to 10 pertaining to addition of Rs.47,98,96,089/-, being receipts on account of support services also the issue is covered in favour of the assessee by ITAT’s orders rendered for AY 2019-20, 2020-21 & AY 2021-22.For the sake of reference the finding given in combined order for AY 2020-21 and 2021-22 (supra) deserves to be extracted: –
“20. We have heard the rival submissions and have perused the relevant material on record. We find that the coordinate bench of ITAT in assessee’s own case for AY 2019-20 in ITA 1620/Del/2022 dated 12.10.2023 has held that receipts on account of support services are not FIS as under:
“16. On a detailed analysis of the services rendered, it appears” that some of the services rendered may not fall in the category of technical or consultancy services. However, some of the services rendered may fall either under technical or consultancy services. But the most crucial aspect, which requires examination is, whether in course of rendition of such services, the assessee has made available any technical knowledge, know-how, skill etc. to Bain India so as to enable Bain India to employ such technology, know-how, skill etc. without the aid and assistance of the assessee. In this context, it must be borne in mind that the agreement for providing support services was executed between the assessee and Bain India on 1st day of April, 2010. Whereas, the present appeal relates to assessment year 2019-20. Thus, it is patent and obvious that from the year 2010 onwards, the assessee is providing support services to Bain India on regular basis. Had it been a case of transfer of technology from the assessee to Bain India by making available technical knowledge, know-how, skill etc. qua the services performed, it would certainly have enabled Bain India to employ such technical knowledge, knowhow, skill etc. in performing such services independently without seeking aid and assistance of the assessee. There would have been no necessity for Bain India to continuously avail such services from the assessee since the year 2010 till the current assessment year. Had it been a case of transfer of technology in such a long duration Bain India certainly would have acquired the technical knowledge, know-how, skill etc. to perform such services on its own, without requiring the assessee to provide them. The very fact that Bain India is still dependent upon the assessee for the support services, establishes the fact that the assessee has not made available technical, know-how, skill etc. relating to such services to Bain India, the service recipient.
17. At this stage, we must also observe that at the time of hearing, learned counsel appearing for the assessee has made a statement at bar that prior to the impugned assessment year, in no other assessment year the Assessing Officer has treated the receipts from support services as FIS and brought it to tax. Thus, on overall consideration of facts and materials on record, we are of the view that the Revenue has not brought on record any materials to establish the fulfillment of make available condition of Article 12(4Xb) of India – USA DTAA.
18. For the sake of completeness, we must observe that in course of hearing, learned Departmental Representative has relied upon a decision of the Coordinate Bench in case of H.J. Heinz Company v. ADIT (Delhi -Trib.).
19. On a careful reading of the said judgment, we find that the decision of the Coordinate Bench is distinguishable on facts as the services rendered in case of that assessee is in relation to manufacture of products. Whereas, in the facts of the present appeal, services rendered are not in relation to any manufacturing activity. In this view of the matter, the receipts cannot be treated as FIS under Article 12(4)(b) of the tax treaty. The Assessing Officer is directed to delete the addition.”
Respectfully following the STAT decision as above, we are of the considered view that in the present case, the support services rendered by the Assessee to Bain India do not make available any technical knowledge, experience, skill, know-how etc. as contemplated under the DTAA and that the amount received for provision of support services rendered by the Assessee to Bain India cannot be treated as FIS under Article 12(4)(b) of the DTAA. Accordingly, we direct the AO to delete the addition. Ground 16 to 19 is allowed.”
Respectfully following the order of ITAT extracted above and since the facts have not changed for the present year, we hold that the amount of Rs.47,98,96,089/- cannot be added as has been done by the Ld. AO.
4.2 Regarding the issue of subscription fee, we find that this issue is also covered in favour of the assessee by the ITAT’s order in assessee’s own case for AY 2021-22 (supra) as under: –
“30. We are inclined to agree with the assessee that the decision of Hon’ble Delhi High Court in CIT v. Relx Inc. supports the case of the assessee wherein it was held as under:
“11. We find that similar would be the position which would obtain when subscription fee is examined n the anvil of article 12 of the DTAA. If the Department were to describe subscription fee as ‘royalty’ they would necessarily have to establish that the payments so received by the assessee was consideration for the use of or the right to use any copyright or a literary, artistic or scientific work as defined by article 12(3) of the DTAA. Granting access to the database would clearly not amount to a transfer of a right to use a copyright. We must bear in mind the clear distinction that must be recognized to exist between the transfer of a copyright and the mere grant of the right to use and take advantage of copyrighted material. Neither the subscription agreement nor the advantages accorded to a subscriber can possibly be considered in law to be a transfer of a copyright. In fact, it was the categorical assertion of the assessee that the copyright remains with it at all times.”
31. Similarly, the Hon’bleHigh Court of Delhi in CIT v. Springer Nature Customer Services Centre GmbH [ITA 306/2023] adopted a similar position. Relevant paragraphs are extracted below:
“25.2 Furthermore, in our opinion, the subscription amount cannot be treated as royalty, having regard to the fact that there is nothing on record to suggest that the respondent/assessee has granted the right in respect of copyright to the concerned subscribers of the e-journals. All that the respondent/assessee did was to sell the copyrighted publication to the concerned entities, without conferring any copyright in the said material.
25.3 The Tribunal, in our view, rightly deleted the addition made under this head, given the judgment rendered by the Supreme Court in the case of Engineering Analysis.”
32. We are of the considered view in the light of discussion above and the judicial precedents, we are inclined to agree with the assessee that the services provided by the assessee under the subscription agreement cannot be construed as right to exploit a copyright, but merely such services provide use of ‘copyrighted article’. We therefore hold that the subscription receipts do not constitute ‘royalty’ in terms of the DTAA and consequently are not taxable in India.”
Respectfully following this decision of the ITAT in the assessee’s own case, the assessee gets consequential relief on the entire addition made by treating the receipts on account of subscription as Royalty.
4.3 Regarding the reasoning advanced by the Ld. AO that in the past years consulting services, receipts and reimbursement of expenses incurred for third party service provider were settled under DTVS Scheme, hence, it deserves to be presumed that the assessee tacitly accepted the taxability of the same,we find that for AY 2019-20 the ITAT has decided the issue in favour of the assessee after following the answer given in the CBDT Circular No.9/2020 dated 22.04.2020 (supra). In light of this circular and the order of the ITAT for AY 2019-20 this ground is also decided in favour of the assessee.
4.4 Regarding the grant of credit for TDS, it is seen that since the TDS amount was not reflected in Form 26AS hence, the assessee excluded the corresponding income while filing its return of income. At this stage the assessee wants credit for the Tax Deducted at Source (TDS). It deserves to be held that while in principle the assessee deserves credit for Tax Deducted at Source but it is also clear that the corresponding income should be offered for tax also. Accordingly, we direct that the AO would take into consideration the TDS proof available with the assessee and would also consider the corresponding income and thereby ensure that the correct tax liability of the assessee is worked out.
4.5 The remaining grounds are general or consequential in nature and hence are not specifically adjudicated.
5. In the result, appeal of the assessee is partly allowed.