Assistance in Implementing Brand Strategy for Use of Network of Members Not Royalty Under India-UK DTAA | ITAT

Case Details: Deputy Commissioner of Income-tax vs. Deloitte Touche Tohmatsu India LLP - [2025] 172 taxmann.com 571 (Mumbai-Trib.)

Judiciary and Counsel Details

• Amit Shukla, Judicial Member & Ms Padmavathy S., Accountant Member
• Niraj Sheth, Adv for the Appellant.
• Krishna Kumar, Sr. DR for the Respondent.

Facts of the Case

The assessee, Deloitte Touche Tohmatsu India LLP (‘DTTILLP’), entered into a shared service agreement with Deloitte Global Services Holding Limited (‘DGSHL’), UK to avail various services from the latter. DTTILLP applied under section 195(2) seeking authorization to remit payments for the services availed under the agreement to DGSHL without deduction of tax at source.

Assessing Officer (AO) held that out of the various services enumerated in the agreement, payments for three services, namely, Global Brand, Global Communication, and Global Technology/Knowledge Management, were to be regarded as being in the nature of ‘Royalty’. Accordingly, he directed DTTILLP to deduct tax at source from the said payments at the rate of 3%.

On appeal, CIT(A) gave relief to the assessee. The matter then reached the Mumbai Tribunal.

ITAT Held

The Tribunal held that the payments were made for information concerning commercial experience. The guidance provided by Holdings to its members is for internal use by the member firms. It is essentially an agreement for rendering services within the Deloitte network. Therefore, the payment for such services cannot be considered payment for the use of information concerning the commercial experience.

There was no transfer of intellectual property by Holdings to the assessee. Moreover, the provision of services cannot be regarded as the provision of information concerning commercial experience. The information utilised/provided in the course of rendering these services is not of confidential or secret in nature but is published information available in the public domain.

Therefore, such a payment cannot be regarded as consideration for imparting any information concerning commercial or knowledge, experience or skill as contemplated in the definition of royalty as contained in clause (iv) of Explanation 2 to section 9(1)(vi) or under article 11(3)(a) of the India-UK tax treaty.

List of Cases Reviewed

• order dated 17/01/2025 in ITA N? 4515/Mum/2024) and 27/07/2022 in ITA No 4744, 4775 to 4782/Mum/2019 [Para 11] followed.