The Delhi High Court in the case The Commissioner Of Income Tax (International Taxation)-1, Delhi Versus M/S Bio-Rad Laboratories (Singapore) Pte. Ltd. observed and has held that the information technology and the other administrative services which is provided by the respondent or assessee to its affiliate in India could be construed as fees for technical services, FTS.
The bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia in the case observed and has stated that the services which are being offered by the respondent or assessee to its Indian affiliates did not come within the purview of FTS, as it is reflected under Article 12(4)(b) of the Indo-Singapore DTAA and it has been concluded that they did not fulfil the criteria of the “make available” principle.
It has been concluded by the Assessing Officer, AO concluded that the services which are provided by the respondent or assessee to the Indian subsidiary were in the nature of the management support services and hence the same is taxable at the rate of 10% plus surcharge and education cess under the Indo-Singapore DTAA.
Therefore, the court observed that the objections lodged before the Dispute Resolution Panel, DRP by the respondent or the assessee did not result in success. Thus, the DRP in the case proceeded to reject the objections filed by the respondent or assessee. Consequently, the final assessment order was passed by the Assessing Officer, AO as it has been stated under Section 143(3) reading with Section 144C (13) of the Income-tax Act, 1961, the same led to the institution of an appeal by the respondent or assessee before the Tribunal.
The Tribunal in the case ruled in favour of the respondent or assessee. Thus, it has been concluded by the Tribunal that the services which are offered by the respondent or assessee to its Indian affiliates did not come within the purview of FTS, as reflected in Article 12(4)(b) of the Indo-Singapore DTAA, that they did not fulfil the criteria of the make available principle.
On the other hand, the department contended before the court that the assessee is providing professional advice to its Indian subsidiary through studies, evaluation, review of reports, liaison work, advice on key policy issues and business operations, HR management, and financial management, among other things.
The Tribunal in its order stated that the agreement between the respondent/assessee and its Indian affiliate had been effective from 01.01.2010 and if as contended by the appellant or revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period.
The counsel, Advocates, Mr Puneet Rai, Sr Standing Counsel with Mr Ashivini Kumar and Mr Rishabh Nangia appeared for the Appellant. The counsel, Dr Sashwat Bajpai represented the respondent.