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आयकर अपील य अ धकरण, मुंबई यायपीठ, एल,मुंबई ।

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES "L", MUMBAI ी जो ग दर संह, या यक सद य एवं ी अ नी तनेजा, लेखा सद य, के सम Before Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member ITA NO.6323/Mum/2016 Assessment Years: 2013-14 Capgemini SA, DCIT(International Taxation)-

Capgemini SA 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is non-resident company, having two subsidiaries, in India, namely Capgemini India Pvt. Ltd. and Capgemini business services (India) Ltd. The assessee gave a guarantee to BNP Paribas in France, whereunder some of its worldwide subsidiaries are entitled to avail of various facilities from a local BNP Paribas Branch, without the subsidiary furnishing any security. The English translation of the guarantee is available at page 19 to 27 of the application before the ld. DRP. For furnishing the said guarantee and in keeping with Transfer Pricing Regulations, the assessee raised an Arms Length Charge on its Indian affiliates. The guarantee commission charged by the assessee was at a flat rate of 0.5% on the guaranteed amount, irrespective of amount actually utilized. In the case of the Capgemini India, the guarantee amount was USD 50 million and in the case of Capgemini business services (India), the guarantee amount was USD 2 million. It is noted that vide communication 28/08/2015, before the ld. Assessing Officer, the claim of the assessee was that the guarantee commission as not liable to tax in India for the following three reasons:-

Capgemini SA

"3. Insofar as Ground of appeal nos. 1 to 4 are concerned, they relate to a single issue arising from the action of income-tax authorities in holding that guarantee commission earned by the assessee amounting to Rs.33,40,347/- was liable to tax in India.

4. In this context, the relevant facts are that the appellant is a foreign company incorporated in France and is a tax resident of France. It is engaged in the business of providing various support, sustenance and developmental service to Capgemini Group companies across the world. During the year under consideration, assessee-company had earned royalty from two of its associate concerns in India, viz., Capgemini India Pvt. Ltd and Capgemini Business Services India Pvt. Ltd. In the return of income filed by the assessee for the assessment year under consideration it declared an income of Rs.9,52,52,240/- on account of such royalty income. In the course of assessment proceedings, the Assessing Officer noticed that assessee had received guarantee commission of Rs.33,40,347/- from the two associate Indian concerns in return for assessee having extended corporate guarantee to BNP Paribas, France for the credit facilities extended by BNP Paribas, France to the associate concerns in India. Before the Assessing Officer the plea of the assessee was that such guarantee commission was not chargeable to tax in India either under the domestic law or even in terms of Double Taxation Avoidance Agreement (DTAA) between India and France. The pertinent point made out by the assessee was that no service was rendered by the assessee, much less a professional/ technical service, and in any case, no service can be said to have been rendered in India. The plea of the assessee did not find favour even with the DRP and accordingly, the Assessing Officer held the guarantee commission of Rs. 33,40,347/- as taxable.

Facts in brief are that the assessee is a resident of France and does not have a permanent establishment in India. During the year assessee has given a corporate guarantee BNP Paribas, a French Bank in France, on behalf of its various subsidiaries worldwide. During the year under consideration, in India, two subsidiaries of the assessee M/s.Capgemini India Pvt. Ltd. and Capgemini Business Services (India) Ltd. were sanctioned credit facilities by the Indian Branches of BNP Paribas, which credit facilities to the extent of USD 15 million4and 2 million respectively, were secured by the said corporate guarantee given by the assessee. The assessee has charged guarantee commission @ 0.5% per annum for the corporate guarantees given on behalf of its subsidiaries in India. The AO has taxed the same by holding it to be "Other Income" under Article 23 of the DTAA between India and France.