Case Number: ITA No. 1166/DEL/2019
Appellant: Russel Reynolds Associates Inc., New Delhi
Respondent: DCIT (International Taxation), New Delhi
Assessment Year: 2014-15
Order Type: Final Tribunal Order
Date of Order: 2022-04-26
Pronounced On: 2022-04-26
Russel Reynolds Associates Inc., incorporated under the laws of the United States, primarily engages in providing human resources advisory services, focusing on senior level executive recruitment and risk mitigation. The case revolves around the taxation of fees from support services and reimbursement of training expenses under the India-USA DTAA.
The main issues contested included whether the support services and training expenses qualify as ‘Fees for Included Services’ (FIS) under the terms of the India-USA DTAA. The Appellant contended that the support services were not ‘technical or consultancy’ in nature and hence should not be classified as FIS. The Tribunal examined the nature of these services, agreeing with the Appellant that they were managerial and necessary for daily operations, not meeting the ‘make available’ clause under the DTAA.
In contrast, the CIT(A) had earlier upheld the classification of these payments as FIS, asserting they were ancillary to the licensed rights under the royalty agreement. However, the Tribunal reversed this decision, citing a lack of evidence that these services were customary or essential to the use of licensed intellectual properties.
The Tribunal’s decision to reverse the findings of the CIT(A) highlights the importance of clear contractual definitions and the specific nature of services in determining tax liabilities under DTAAs. This case sets a precedent for how ancillary services connected to intellectual property are treated under international tax law, especially in the context of managerial versus technical services.
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