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2022 (9) TMI 1555 - AT - Income TaxAccrual of income in India - income deemed to accrue or arise in India - sales and marketing services rendered by the assessee to foreign marketing companies - whether it would not fall within the ambit of FTS as defined under section 9(1)(vii) or under Article 12 of DTAA? - AR submitted that the assessee is not providing any technical / managerial or consultancy services - HELD THAT:- In the instant case, the assessee is not providing any technical, managerial or consultancy services rather has been engaged to act as authorized business partner to market and promote the products or services of MSSPL outside India - in fact, the AO/DRP have not even concluded as to what is the nature of services rendered by the assessee. The decision regarding what are the products/services that are to be developed or provided, the price to be charged to the customer etc. are solely taken by MSSPL. The assessee does not play any role in the decision-making process. Further, once the assessee procures the orders, it is at the discretion of MSSPL whether to sell the product or render services to identified customers. As decided in Panalfa Autoelectrik Ltd [2014 (9) TMI 706 - DELHI HIGH COURT] held that commission paid by the assessee to its foreign Agent for arranging export sales and recovery of payments could not be regarded as fee for technical services under section 9(l)(vii) of the I.T. Act. The High Court held that the skill, business acumen and knowledge acquired by the non-resident were for his own benefit and use. Also see Bangalore tribunal in the case of Deccan Creations (P.) Ltd [2021 (12) TMI 707 - ITAT BANGALORE] had held that services of foreign agents in the form of providing the data related to market trends and requirements of customers does not constitute as managerial services, as these services are usually provided by any agent. Thus, sales commission paid to foreign agents on the value of sales affected through them cannot be treated as technical services Thus the income received towards sales commission does not satisfy the definition of "FTS" under the Act as it is not in the nature of Managerial, Technical or Consultancy Services. Taxability as per DTAA - scope of 'made available' clause - As per Memorandum of Understanding ("MOU") on Article 12 of the Treaty, entered into by the Government of India and the Government of USA on May 15, 1989, the technology is considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills, etc., are made available to the person purchasing the service. AO has stated that marketing services rendered by the assessee are technical in nature and which are used by MSSPL for development of business, which results in enduring benefit. Accordingly, the A.O. has concluded that make available is satisfied as there is transfer of skill and knowledge which falls within the ambit of technical services. DRP has also confirmed the view of the A.O. The AO and DRP has erred in not appreciating that what should be made available is technical knowledge, experience, skill etc. Making available service does not make available knowledge, experience, skill etc. MSSPL has to approach the assessee every time to get new customers and maintain relationship with existing customers. The test of make available as envisaged in the DTAA is therefore not satisfied in the instant case. We hold that the sales and marketing services rendered by the assessee to MSSPL would not fall within the ambit of FTS as defined under section 9(1)(vii) or under Article 12 of DTAA.
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