The subject under consideration before advance ruling authority in  431 ITR 626 (AAR) correspond to whether the continued real estate services rendered by UK enterprise to its subsidiary entity ( Cushman & Wakefield ) make available technical knowledge, experience, skill know-how or processes, or consist of the development and transfer of a technical plan or technical design. This lead to scrutiny of agreement clauses and email correspondence exchanged among the holding and subsidiary.
The agreement as per AAR explained the underlying objective of the agreement to share the expertise of the assessee in relation to the various services with the subsidiaries for shared benefit through economies of scale and an equitable distribution of cost and charges amongst the parties. In the second the assessee had provided evidence in respect of categories of services provided and that was the e-mail evidence furnished in respect of each of the services availed of. Upon perusal of such evidence the AAR found that the assessee had provided information on various business and commercial materials, guidelines, templates based practice, standard operation procedures, strategies, that could be adopted and employed in the various spheres of business. The assessee had co-ordinated and negotiated on various aspects of business, monitored the periodical performances and done support services which did not make available any technical knowledge, experience, skill know-how or process and that such services provided as per agreement are not in respect of the core business activities of the applicant rather they are subsidiary in nature.From the nature of services rendered it was evident that the technical knowledge, experience, skill know-how or processes were not being made available to the recipient of the service, the AAR ruled so.
In this case the holding company provided following services to 40 global entities in a shared services agreement :
– Company Secretarial and General Counsel
– Group Finance
– Global Procurement
– Global Information System
– Global Human Resources
– Global Communication and Marketing
– Global Risk and Compliance
– Global Client
– Consulting and Research (C&R)
– Services of GCS
And most importantly the AAR went into examination of each classification of service and sub-classified services and further examined their actual rendering from the sample emails and additional e-mails exchange.
There therefore lies a big challenge upon payers to maintain and keep evidence of actual rendering of service to meet the department scrutiny in any eventuality.