Myntra Inc. vs Assistant Commissioner of Income Tax

Court/Forum: ITAT

Bench: Delhi Bench ‘D’: New Delhi, Shri Ramit Kochar, Accountant Member and Shri Raj Kumar Chauhan, Judicial Member

Order Date: 2026-04-24

Outcome: Assessee

Sections: Section 9(1)(vii), Article 12(4) of the India-US DTAA

Core Ratio

The 'make available' condition under Article 12(4)(b) of the India-US DTAA is not satisfied if the services do not involve a transfer of technical knowledge or skills.

Outcome

The ITAT ruled in favor of the assessee, Myntra Inc., by deleting the addition of Rs. 41,00,42,414/- made by the AO, which was treated as fees for technical services. The tribunal followed its earlier decision for AY 2021-22, where it was held that the services did not meet the 'make available' condition under the India-US DTAA.

Favourability

Assessee

Core Issue

The central legal question was whether the manpower support services provided by Myntra Inc. to Flipkart Internet Pvt. Ltd. constituted 'fees for technical services' under the Income-tax Act and the India-US DTAA.

Facts of the Case

Myntra Inc., a US-based company, provided manpower support services to Flipkart Internet Pvt. Ltd. and claimed the income as exempt under the India-US DTAA. The AO treated the income as fees for technical services and made an addition, which was upheld by the DRP.

Arguments by Assessee

The assessee argued that the services were not technical in nature and did not make available any technical knowledge or know-how to Flipkart, thus not falling under the category of technical services.

Arguments by Revenue

The Revenue contended that the services provided by Myntra Inc. were technical in nature and satisfied the 'make available' clause, thus taxable as fees for technical services under the Income-tax Act and the DTAA.

Key Sections & Provisions

Section 9(1)(vii) of the Income-tax Act pertains to fees for technical services, and Article 12(4) of the India-US DTAA defines 'fees for included services' and the 'make available' condition.

Ratio Decidendi

The tribunal held that the manpower support services provided by Myntra Inc. did not involve the transfer of technical knowledge or skills to Flipkart, thus not satisfying the 'make available' condition under Article 12(4)(b) of the India-US DTAA. The decision was based on the principle that mere provision of services does not constitute 'fees for technical services' unless there is a demonstrable transfer of technical expertise.

Court Reasoning & Analysis

• The tribunal noted that the DRP and AO did not provide any new material or directions for AY 2022-23.
• The tribunal followed its earlier decision for AY 2021-22, where it was held that the services did not meet the 'make available' condition.
• The tribunal emphasized the need for a demonstrable transfer of technical knowledge or skills to satisfy the 'make available' condition.
• The tribunal concluded that the manpower support services did not involve such a transfer, thus not constituting fees for technical services.

Key Observations

• The factual matrix for AY 2022-23 was similar to AY 2021-22, where the tribunal had already ruled in favor of the assessee.
• The tribunal highlighted the importance of jurisdictional consistency and the binding nature of its previous decision.

Case Laws Cited

• International Management Group (UK) Ltd. vs. CIT

Related Issues

• Interpretation of 'make available' clause in DTAA
• Classification of services under DTAA
• Jurisdictional consistency in tax rulings
• Taxability of cross-border services

Important Passages

• The make available condition would be satisfied only if the rendering of service involves a clear and demonstrable transfer of technical skills, expertise or knowhow to the recipient.

Not Decided / Remanded

Issues related to interest and penalty proceedings were not decided as they became insignificant due to the main decision.

Practical Takeaway

Practitioners should note the importance of the 'make available' condition in determining the taxability of services under DTAA, and the significance of jurisdictional consistency in tribunal decisions.

Supporting Judgments

• M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax (ITAT, 2020) — Disallowance under section 14A is not applicable if no exempt income is earned during the assessment year.
• SCHNEIDER ELECTRIC SOUTH EAST ASIA (HQ) PTE LTD vs ASST COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 3 (1)(2), NEW DELHI AND ORS. (HC, 2022) — The denial of immunity under Section 270AA is arbitrary if the Revenue does not specify the grounds for misreporting.

Contrary Judgments

• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax (SC) — A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• M/s. Alubound Dacs India Private Limited vs. Dy. CIT (ITAT, 2024) — CSR expenses mandated by law can be claimed as a deduction under Section 80G if they meet the stipulated conditions.