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
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.
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.
Assessee
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.
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.
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.
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.
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.
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.
Issues related to interest and penalty proceedings were not decided as they became insignificant due to the main decision.
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.
1
ITA No.2040/Del/2025, A.Y. 2022-23
Myntra Inc. 8201 164 Th
Redmond, WA 98052
Vs. Assistant Commissioner of Income Tax Circle Int. Tax. 2(2)(1), New Delhi (Respondent) (Appellant)
Appellant by Sh. Sachit Jolly, Sr. Adv. With Ms. Sherry Goyal, Adv. Respondent by Sh. M.S.Nethrapal, CIT DR
Date of Hearing 28/01/2026 Date of Pronouncement 24/04/2026
1. This appeal is filed by the appellant/assessee against the assessment order dated 21.01.2025 passed u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 (‘the Act’), in pursuant to the direction of Ld. Dispute
ITA No. 2040/Del/2025 Myntra Inc.
2
Resolution Panel-2, New Delhi (Ld. DRP) u/s 144C(5) of the Act for AY. 2022-23.
2. The brief facts as culled out from the order of authorities below as narrated in para No. 1 to 4 of the assessment order are as under: “The assessee filed its original return of income for A.Y 2022-23 on 30.11.2022 declaring total income of Rs. NIL and claimed Rs. 4,47,76,632/- as refund. Further, the assessee has claimed Rs.41.00.42,414/- as exempt income in its ROI filed for A.Y. 2022-23. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Income Tax Act, 1961 dated 31.05.2023 was issued to the assessee. Subsequently, notices u/s 142(1) of the Act dated 11.08.2023 and a showcause was issued on 01.03.2024 were issued along with questionnaire. In response to the notices/questionnaire, submissions were filed by the assessee time to time and the required details/submissions were furnished which have been examined and placed on record.
2. Myntra Inc. is a foreign company incorporated in the United States of America ('USA').During the captioned AY, the Company had rendered manpower support services to Flipkart Internet Private Limited ('Flipkart Internet'), for which Flipkart Internet has paid consideration to Myntra Inc. These manpower support services were provided by the Company from USA.
3. During the course of assessment proceedings, the assessee received an amount of Rs. 41,00,42,414/- for rendering manpower support services to Flipkart Internet Private Limited. The assessee company has claimed the said consideration received from Flipkart Internet Services as exempt from taxation under the India-US DTAA.
4. A show cause notice dated 01.03.2024 was issued in this case to explain as to why the Income claimed as exempt income should not be taxed as Fees for technical Services (FTS). The relevant portion of the show caused notice is as under- "The assessee is required to clarify if there is any change in factual matrix as compared to preceding assessment year.
ITA No. 2040/Del/2025 Myntra Inc.
3
If there is no change in factual matrix then you are required to showcause why assessment proceedings should not be concluded as per the preceding assessment year." In pursuance of the show cause notice dated 1 st March, 2024, the assessee filed detailed replies and the draft assessment order was passed making an addition of Rs. 41,00,42,414/- received by the assessee company from Flipkart Internet Pvt. Ltd. and added to the income of the assessee company as FTS and taxed as per the DTAA. Hence, the Penalty proceeding u/s 270A (1) of the Act was also initiated separately. The assessee filed various objections to the DRP. Before the Ld. DRP, it was submitted that services rendered by the assessee were not services that required personnel of specialized knowledge or skill, but were merely manpower support services which did not make available any technical knowledge or know-how to Flipkart internet, and thus, were not technical in nature, and could not fall under the category of technical services, as has been held by the Assessing Officer in the draft assessment order dated 27.03.2024. It was therefore, submitted that the receipts from the services rendered by the assessee cannot be categorize as FTS u/s 9(1)(vii) of the Act.
ITA No. 2040/Del/2025 Myntra Inc.
4
3. The Submissions made by the assessee did not find favour with the Ld. DRP and the ld. DRP issued the direction in para No. 6 of his order dated 26.04.2024 extracted as under: “(i) The Panel has carefully considered the submission filed by the assessee and the DAO passed by the AO. The only issue is the action of the AO treating the receipts of Rs. 41,00,42,414/-from Flipkart Internet Pvt. Ltd. on account of facilitating manpower support services as "fees for technical services and hence taxable under Section 9(1)(vii) of the Income-tax Act, 1961 ("Act") and under Article 12(4) of the India-USA Double Taxation Avoidance Agreement (DTAA). (ii) It is observed that the factual matrix of the case is similar to that of the previous year i.e. AY 2021-22. The DRP in its order for AY 2021-22 had passed a detailed, emphatic and speaking order with respect to the issue involved. As the factual matrix continues to be the same for AY 2022-23, therefore, the basis for directions to be issued for AY 2022-23, shall be the directions already issued.” 4. In pursuance of the directions of the DRP, Ld. Assessing Officer vide impugned order has made addition of Rs. 41,00,42,414/- as proposed in the draft assessment order.
5. Aggrieved by the impugned assessment order, the assessee is in appeal before us and raised following grounds of appeal: “1. That on the facts and circumstances of the case, the Final Assessment Order dated 21.01.2025 ("Impugned Order") passed 1 under Section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 ('Act') is barred by limitation having been passed beyond the time period specified under Section 153 of the Act.
ITA No. 2040/Del/2025 Myntra Inc.
5
2. That, in the facts and circumstances of the case and in law, the AO erred in making an addition of Rs. 41,00,42,414/- to the returned income of by wrongly holding that the receipts from Flipkart Internet Private Limited ("Flipkart") on account of provision of manpower support services are in the nature of "fees for technical services" taxable under section 9(1)(vii) of the Act and Article 12 of the India-US Double Taxation Avoidance Agreement ("DTAA").
3. That, in the facts and circumstances of the case and in law, the AO erred in alleging manpower support services to be in the 3 nature of "fees for technical services" without appreciating that the Assessee does not satisfy the "make available" clause envisaged under the provisions of Article 12(4) of the DTAA.
4. That the AO and DRP failed to appreciate that since the above services were rendered by the Appellant entirely from outside India and no part of services were rendered in India, therefore, such receipts were not taxable as Fees for Technical Services under Article 12(4) of the DTAΛ. 5.That in view of the facts and circumstances of the case, AO has erred on facts and in law in levying and charging interest without specifying the provision under which the said interest was levied, and without providing any reason for the same.
6. That the AO erred in initiating penalty proceedings under Section 270A of the Act.
7. The Appellant craves leave to add, amend, alter or vary from the aforesaid grounds of appeal at or before the time of hearing.” 7. We have heard the Ld. AR on behalf of the assessee and ld. DR for the Revenue. Ld. AR at the very outset submitted that the appellant/assessee does not press the ground no. 1 with respect to limitation and the assessment order being barred by limitation, since ground 1 has not pressed the same is accordingly dismissed as not
ITA No. 2040/Del/2025 Myntra Inc.
6
pressed. Ground No. 2 to 4 pertains to the addition of Rs. 41,00,42,414/- on the ground of treating the receipts from Flipkart Internet Pvt. Ltd. (‘Flipkart’) on account of provision of manpower support services, in the nature of “fees from technical services (FTS)” holding the same taxable u/s 9(1)(vii) of the Act and the Article 12 of the India-US Double Taxation Avoidance Agreement (‘DTAA’).
8. It has been argued by the Ld. AR that the Ld. DRP has not given any fresh directions for AY 2022-23 as it has simply directed the AO to follow the directions given for the preceding year i.e. AY 2021-22 in the case of the assessee and the assessment order has been passed accordingly on the basis of the DRP directions issued for the preceding year. It is further argued that the addition made for the preceding year A.Y. 2021-22 has been deleted by the Ld. Jurisdictional Tribunal in ITA No. 3770/Del/2023 for A.Y. 2021-22 vide order dated 10.12.2025 wherein the Ld. Tribunal has held that the receipts from Flipkart towards manpower support services do not constitute fees for technical services (FTS) either under section 9(1)(vii) of the Act or under Article 12(4) of the India-US DTAA. It is therefore, argued that the present case of AY 2022-23 is covered by the said judgment and the addition made in this year needs to be deleted accordingly. The Ld. AR has relied the
ITA No. 2040/Del/2025 Myntra Inc.
7
relevant portion of order in ITA No. 3770/Del/2023 (supra) in its own case particularly para no. 9 to 12 of the said order. It is therefore, submitted that since the facts and circumstances of the year under appeal remained identical to those examined by this Tribunal for A.Y. 2021-22 and no distinguishing feature has been brought on record by the AO or the DRP, therefore, respectfully following the principal of jurisdictional consistency and the binding decision of the jurisdictional Tribunal in appellant’s own case for preceding AY 2021-22, the impugned addition of Rs. 41,00,42,414/- deserves to be deleted.
9. The Ld. DR on the other hand while supporting the order of the Ld. lower authorities left it to the discretion of the court to consider the judgment of the Jurisdictional Tribunal for the preceding year in assessee’s own case. Nothing is brought to our notice on behalf of the revenue if the order in ITA No. 3770/Del/2023 (supra) has ever been challenged before the higher forum and the appellant on the other hand claimed that the said order has attained finality.
10. We have heard the rival submission and examined the order of the Jurisdictional Tribunal in ITA No. 3770/Del/2023 (supra) and the relevant portion contained in para 9 to 12 is extracted below as under:
ITA No. 2040/Del/2025 Myntra Inc.
8
“9. In ground of appeal no. 3 & 4, the assessee has assailed addition of Rs.24,72,38,630/- i.e. the amount received from Flipkart for provision of manpower support services. The assessee has claimed the receipts as exempt from tax under India-US DTAA, whereas, the AO has held said receipts in the nature of FTS, taxable u/s.9(1)(vii) of the Act as well as Article 12(4) of India-US DTAA. The assessee is engaged in providing business support services including manpower support services. The assessee entered into service agreement with Flipkart for providing following services:
1. Developing natural language understanding technologies using state of the art Deep Learning techniques, Chat Bots, Knowledge graphs and Computer Vision;
2. Collaborate with academic institutions in the US;
3. Publish papers in leading conferences; & 4. Create Intellectual Property (Patents, Trade Secrets). For providing above services, the assessee charge actual cost-plus mark-up of 10% on the cost.
10. The Assessing Officer has held that the payments for providing the aforesaid services are in the nature of FTS as the assessee is disseminating its experience, knowhow and expertise in the field of business activity which capacitates the recipient of services perform better and enrich its business. Since, the assessee also facilitates to collaborate with academic institution in US as per the requirement of Indian entity, therefore, the services provided by the assesses also satisfies make available clause. The manpower support services provided by the assessee to the Flipkart as detailed above nowhere reflects transfer of any knowhow, technical skill, technical knowledge or process or transfer of any technical plan or design so as to satisfy ‘make available’ condition in Article 12(4)(b) of India-US DTAA. According to the AO ‘make available’ condition is satisfied as the assessee facilitates to collaborate with academic institution in US. The understanding of the AO with respect to ‘make available’ condition is erroneous. There is no finding by the AO or the DRP that the assessee is transferring any technology/knowhow, skill/experience or process or in any manner transfer technical plan or technical design so as to constitute any services for which payments fall within the meaning of FTS. The India-US DTAA Article 12(4) defines Fee for Included Services (FIS). The same reads as under:-
ITA No. 2040/Del/2025 Myntra Inc.
9
“4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know- how, or processes, or consist of the development and transfer of a technical plan or technical design.” As per the AO, case of assessee falls in clause (b). To fall within the scope of Clause (b) of Article 12(4) the mandatory condition is that such services should ‘make available’ technical knowledge, experience, skill, knowhow or processes, or consist of the development and transfer of technical plan or technical design. In our considered view, the condition as envisaged under Article 12(4)(b) of India-US DTAA is not satisfied in the instant case.
11. The Hon’ble Delhi High Court in the case of International Management Group (UK) Ltd. vs. CIT (supra) has held that make available condition would be satisfied only if rendering of services involves clear and demonstrable transfer of technical skill, expertise or knowhow to the recipients. The relevant observations of the Hon’ble Jurisdictional High Court on this issue are as under: “93. As we read Article 13(4)(c) of the DTAA, it becomes manifest that the mere furnishing of service would not suffice and a liability of tax would be triggered only if the technical or consultancy service were coupled with a transfer of the expertise itself. The expression "make available" must be construed as an enablement, conferral of knowledge and which would lead to the payer becoming skilled to perform those functions independently. The make available condition would be satisfied if the services rendered entails equipping the recipient with skill and evidencing an apparent conferment, alienation or transfer of skill, knowledge or know-how. This transfer of knowledge or skill is a pivotal factor in determining whether the consideration received can be classified as FTS. The ―make available‖ stipulation ensures that only those services that impart lasting technical benefits are classifiable as FTS. It was on a consideration of the aforesaid that this Court in Bio- Rad had held that the real test would be the transfer of technical knowledge, the knowledge and skills and expertise of the provider being absorbed by the payer and who would then have the capability to deploy that knowledge or skill without reference to the original provider. This
ITA No. 2040/Del/2025 Myntra Inc.
10
reinforces our view that 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. It must involve a transfer of capabilities and not just the temporary use of the provider's knowledge, expertise or skill.
94. This leads us to the definitive conclusion that the rendering of technical and consultancy services has to be read alongside and in conjunction with "make available" as that phrase appears in the aforesaid paragraph. On a plain textual reading of Article 13 it becomes apparent that both the rendering of service and the skill, knowledge and expertise being made available are conditions which must be concurrently and cumulatively satisfied. What we seek to emphasize is that Article 13 in unambiguous terms creates an enduring, unfading and imperishable link between the furnishing of service and a transmission or conferment of technical expertise, knowledge and skill.
95. It is also important to bear in mind that the mere usage or utilisation of technical or consultative material in aid of business would not be sufficient to attract Article 13 of the DTAA. If we were to accept the submission that handing over of research or advisory work were sufficient for the purposes of Article 13, it would render the "make available" condition comprised in Para 4 (c) wholly redundant and otiose since the mere rendering of service would have sufficed. As De Beers correctly holds "The tax is not dependent on the use of technology by the recipient." The make available prescription bids us to make a conscious distinction between a mere service provision and the impartation of lasting expertise. The offer of service or advise does not fundamentally alter the recipient's capabilities. These services, while potentially valuable, do not endow the recipient with new skills or knowledge which could be independently deployed in the future. The kernel of ―make available must therefore be recognised to be a transfer of technology or skills rather than a temporary reliance on external support.” [Emphasised by us]
12. Merely, for the reason that the assessee plays some role in collaborating with academic institutions in the US does not per se establish that the assessee is ‘making available’ any knowhow, technical knowledge or skill. Thus, in light of facts of the instant case and the decision of Hon’ble Jurisdictional High Court (supra), we find merit in ground of appeal no. 3 & 4 of assessee’s appeal, hence, the same are allowed.” It is as evident from the above extracts that the Hon’ble Jurisdictional Tribunal has examined the same issue which is before us in this year, in a very meticulous and detailed manner and has
ITA No. 2040/Del/2025 Myntra Inc.
11
reached to the conclusion that the condition as envisaged u/s 12(4)(b) of the India-US DTAA is not satisfied in the this case and the manpower support services provided by the assessee to Flipkart nowhere reflects transfer of any know-how, technical skill, technical knowledge or process or transfer of any technical plan or design so as to satisfy, “make available” condition in Article 12(4)(b) of India-US DTAA. It was further held by the Jurisdictional Tribunal that merely for the reason that the assessee plays some role in collaborating with academic institutions in the US does not per se establish that the assessee is ‘making available’ any knowhow, technical knowledge or skill. Hence, the ground no. 3 and 4 in the said appeal before the Jurisdictional Tribunal which are similar to the ground no. 2 to 4 before us were allowed and the addition so made on account of FTS was deleted.
12. Admittedly, there is no fresh directions or fresh discussion of any new material either by the Ld. DRP or the AO in this year before us. Hence, respectfully following the decision of Jurisdictional Tribunal ITA No. 3770/Del/2023 (supra), we are of the considered opinion that the direction of the DRP and the addition made in pursuance of direction by the AO in this years are not sustainable and are
ITA No. 2040/Del/2025 Myntra Inc.
12
accordingly order to be deleted. The ground no. 2 to 4 raised by the assessee are accordingly allowed.
13. Ground No. 5 to 7 are consequential grounds pertaining to interest and penalty proceedings and are not required to be decided as the decision on the said grounds pales into insignificance, in view of our decision on ground no. 2 to 4 and the same are disposed of accordingly.
14. The appeal of the assessee for the above discussion is accordingly allowed. Order pronounced in open Court on 24th April, 2026
Sd/- Sd/-
Dated: 24/04/2026 Binita, Sr. PS Copy forwarded to:
1. Appellant 2. Respondent
4. CIT(Appeals)
5. Sr. DR: ITAT