The Income Tax Appellate Tribunal, Mumbai, has delivered a significant ruling clarifying the tax treatment of market data charges and employee expense reimbursements received by a U.S.-based financial entity from its Indian associates. The decision reinforces the principle that cost recoveries under cross-border service arrangements, where no transfer of technology or intellectual property occurs, do not constitute taxable royalty or fees for technical services under the India-US Double Taxation Avoidance Agreement.
Background & Facts
The Dispute
The appellant, Goldman Sachs And Co. LLC, a non-resident corporate entity incorporated in the United States and tax-resident there, operates in India as a Foreign Portfolio Investor (FPI) registered with SEBI. It has no Permanent Establishment (PE) in India under the India-US Double Taxation Avoidance Agreement (DTAA). During Assessment Year 2023-24, it received payments from six Indian associate enterprises - Goldman Sachs Services Private Limited (GSSPL), Goldman Sachs (India) Securities Private Limited (GSISPL), Goldman Sachs (India) Alternative Investment Management Private Limited (GSIAIMPL), Goldman Sachs Assets Management (India) Private Limited (GSAM), Goldman Sachs (India) Finance Private Limited (GSIFPL), and Goldman Sachs (India) Capital Markets Private Limited (GSICMPL) - for services rendered and expenses incurred on their behalf.
Two specific categories of receipts were challenged by the Assessing Officer (AO): (1) Rs. 53,09,97,431/- as market data charges, and (2) Rs. 41,76,42,548/- as reimbursements for employee-related expenses. The AO treated both as taxable income - the former as royalty under Article 12 of the DTAA, and the latter as fees for included services (FIS) or fees for technical services (FTS).
Key Facts
- The appellant entered into a global cost allocation agreement dated 01.06.2007 with its group entities to share common infrastructure and service costs.
- Market data charges arose from subscriptions to third-party financial data providers such as Bloomberg, Reuters, Platts, Moody’s Analytics, FactSet, S&P, and others.
- The total amount recovered from Indian associates for market data access in AY 2023-24 was Rs. 53,09,97,431/-, corresponding to USD 32,85,994.
- The appellant did not own or host the databases; it merely accessed them via license and passed on the cost to Indian associates based on usage.
- Employee expense reimbursements of Rs. 41,76,42,548/- related to salaries, benefits, and overheads of employees seconded to Indian associates under a global staffing model.
- The appellant had no control over the work performed by seconded employees; they were under the direction of the Indian associates.
- The appellant had previously received favorable rulings from the ITAT for Assessment Years 2013-14, 2014-15, 2015-16, and 2017-18 on identical facts.
Procedural History
- 13.11.2025: Final assessment order passed under Section 143(3) read with Section 144C(13) of the Income Tax Act, 1961, adding Rs. 53,09,97,431/- as royalty and Rs. 41,76,42,548/- as FIS/FTS.
- Prior to 13.11.2025: Dispute Resolution Panel (DRP) upheld the AO’s additions, relying on the Department’s objection to earlier ITAT rulings.
- 08.05.2023: ITAT Mumbai, in consolidated orders for AYs 2013-14 to 2017-18 (ITA No. 401/Mum/2018), held that market data charges are not royalty.
- 29.04.2022: ITAT Bangalore, in ITA Nos. 362-369 & 345/Bang/2020, held that reimbursements for seconded employees are not FIS/FTS.
- 2024: Karnataka High Court dismissed the Revenue’s appeal against the Bangalore ITAT order in ITA No. 128 of 2024.
- 30.03.2026: ITAT Mumbai, in ITA No. 6033/Mum/2025, upheld the non-taxability of similar receipts for Goldman Sachs International.
- 15.04.2026: Hearing held before ITAT Mumbai in the present appeal (ITA No. 9029/Mum/2025).
- 05.06.2026: Judgment pronounced.
The Parties' Positions
For the Appellant
- Argued that market data charges are cost recoveries, not payments for use of intellectual property.
- Emphasized that the appellant has no control over the third-party servers, no transfer of software or technical knowledge, and no exclusive rights granted.
- Relied on the ITAT’s own prior decisions (2023) and the Karnataka High Court’s affirmation of the Bangalore ITAT’s ruling on FIS/FTS.
- Contended that the Department’s refusal to follow binding precedent merely because appeals are pending before High Courts is legally unsustainable.
For the Respondent
- Maintained that market data access constitutes use of information concerning commercial experience, falling within Article 12(4) of the DTAA.
- Argued that employee reimbursements involve provision of technical services by seconded personnel, thus qualifying as FIS/FTS.
- Relied on the AO’s and DRP’s view that prior ITAT rulings were under appeal and therefore not binding.
Relief Sought
The appellant sought deletion of the additions of Rs. 53,09,97,431/- and Rs. 41,76,42,548/-, and a declaration that such receipts are not taxable in India under the India-US DTAA.
The Legal Issue
The central questions were: (1) Whether receipts from recovery of market data subscription costs from Indian associates constitute royalty under Article 12 of the India-US DTAA? (2) Whether reimbursements for expenses of seconded employees qualify as fees for technical services or fees for included services under the same treaty?
Arguments Presented
For the Appellant
The appellant relied on the ITAT’s own 2023 order in its favor for earlier assessment years, which held that market data charges are not royalty because they represent reimbursement of third-party subscription costs without any transfer of technology, software, or intellectual property. It further cited IMS AG v. DCIT (ITA No. 6445/Mum/2016), where the Tribunal, following the Karnataka High Court in CIT v. Wipro Ltd. and the Mumbai High Court in DIT v. Dun & Bradstreet, held that access to commercial databases is akin to purchasing a book - a one-time informational product, not a license of copyright or technical knowledge. The appellant also cited the Karnataka High Court’s dismissal of the Revenue’s appeal against the ITAT’s ruling on seconded employee reimbursements, establishing that such payments are not FIS/FTS when no control or direction over the employee is exercised by the payor.
For the Respondent
The Revenue contended that the nature of the data accessed - financial, commercial, and scientific - fell within the definition of royalty under Article 12(4) of the DTAA, which includes payments for information concerning industrial, commercial, or scientific experience. It further argued that seconded employees rendered technical services to Indian associates, making the reimbursements taxable as FIS/FTS. The Department’s primary argument was that since appeals against the ITAT’s prior favorable orders were pending before the High Courts, those orders could not be treated as binding precedent in the current assessment year.
The Court's Analysis
The Tribunal conducted a detailed analysis of the nature of the transactions, distinguishing between the transfer of intellectual property and the mere recovery of costs. It emphasized that the India-US DTAA’s definition of royalty under Article 12(4) requires a payment for the use of, or right to use, any copyright, patent, design, model, plan, secret formula, process, or information concerning industrial, commercial, or scientific experience. The Tribunal found that the appellant neither owned nor licensed any copyright or technical knowledge to its Indian associates. The data was accessed via third-party vendors, and the appellant merely allocated the cost of access based on usage.
"The payment is in respect of usage of the database of the third-party vendors, which was later on recovered by the assessee from the associated enterprises. Therefore, in view of the aforesaid decision, once the payment made for the usage of the database does not fall within the ambit of Royalty, recovery of costs by the assessee from the associated enterprises for the usage of the database cannot also result in Royalty in the hands of the assessee."
The Tribunal further noted that the Revenue had not disputed the factual similarity between the current assessment year and the earlier ones where the ITAT had ruled in favor of the appellant. It rejected the Revenue’s argument that pending appeals before the High Court negate the binding nature of the ITAT’s own prior decisions. The Tribunal held that a coordinate bench’s decision, even if under appeal, remains binding until overturned by a higher authority. It cited the principle that the Department cannot selectively ignore favorable precedents merely because it has filed appeals.
Regarding the FIS/FTS issue, the Tribunal relied on the ITAT Bangalore’s 2022 decision and the Karnataka High Court’s 2024 dismissal of the Revenue’s appeal. It held that the seconded employees were under the direction and control of the Indian associates, and the appellant merely recovered actual costs incurred. There was no provision of technical services by the appellant; the services were rendered by employees under the Indian entities’ supervision. The Tribunal also referenced its own 2026 order in Goldman Sachs International, which reached the same conclusion.
The Verdict
The appellant succeeded on both grounds. The ITAT Mumbai allowed the appeal and directed the Assessing Officer to delete the addition of Rs. 53,09,97,431/- as royalty and Rs. 41,76,42,548/- as FIS/FTS. The Tribunal held that neither the market data charges nor the employee expense reimbursements constitute taxable income under the India-US DTAA. The order is final and binding on the parties.
What This Means For Similar Cases
Cost Recoveries Are Not Royalty
- Practitioners can now confidently argue that reimbursements for third-party subscription costs (e.g., Bloomberg, Reuters, S&P) are not royalty if there is no transfer of software, technical knowledge, or intellectual property rights.
- The key test is whether the recipient has control over the data source or merely acts as a cost conduit - if the latter, the payment is a reimbursement, not royalty.
- This aligns with the principle established in Dun & Bradstreet and IMS AG: access to commercial databases is akin to purchasing a report or book.
Seconded Employees Do Not Create FIS/FTS
- Reimbursements for salaries and benefits of seconded employees are not FIS/FTS if the host entity exercises full control over the employee’s work.
- The burden is on the Revenue to prove that the payor is receiving technical services, not merely recovering costs.
- This judgment reinforces the Karnataka High Court’s view that FIS/FTS requires active provision of technical expertise by the payee - not passive cost recovery.
Precedents Bind Until Overturned
- Tax authorities cannot refuse to follow binding ITAT decisions merely because appeals are pending in High Courts.
- Practitioners should cite prior favorable ITAT orders even if the Department has filed appeals - the burden shifts to the Revenue to demonstrate factual or legal distinction.
- This prevents arbitrary denial of relief based on procedural delays in higher courts.
