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2024 (3) TMI 216 - BOMBAY HIGH COURTChallenge AAR ruling - Income taxable in India or not? - TDS liability u/s 195 - determination of tax liability of the payments made by Petitioner to its non-resident group company for availing General Business Support Services ("BSS") under a Cost Contribution Arrangement ("CCA") - AAR held that Petitioner is under obligation to withhold tax u/s 195 - scope and ambit of Article 13 of the India-UK DTAA whether the finding of the AAR that services availed by Petitioner from non-resident group company or payments made by Petitioner to it are of/for ‘technical/’consultation’ services? and whether such services are ‘made available’ to Petitioner? HELD THAT:- AAR has not gone into but prima facie has accepted the declaration provided by SIPCL that it does not have permanent establishment in India and in any case that was not the issue before AAR. There is no discussion or finding pertaining to the status of SIPCL [non-resident group company] as having permanent establishment in India in terms of Article 5 of the DTAA. Hence, determination by the AAR on this issue remains inconclusive. A perusal of the list of services relate to managerial services not involving anything of a technical nature. The AAR has discussed the services appearing in the CCA and has concluded that these activities in a retail business are at the core of retail marketing and hence advice tendered in taking a decision of commercial nature is a consultancy service. AAR has further considered the definition of the word ‘Consultancy’ as defined in the Oxford English dictionary and has observed that a consultant is a person who gives professional advice or services in a specialized field. However, the AAR failed to appreciate that the word ‘Consultancy’ appearing in the Article is to be interpreted in the context of consultancy which makes available technical knowledge, etc. and not of managerial nature. The reading of the Article clearly indicates that the consultancy service must be which makes available technical knowledge, etc. Sub-para (c) to Article 13(4) restricts such services to those which make available technical knowledge or consist of development and transfer of a technical plan or technical design. The services availed by Petitioner cannot be said to be technical services and Article 13 is wholly inapplicable in the facts and circumstances of the present case. Even if it is fees for technical or consultancy services, it can be only where fees are paid in consideration for making available technical knowledge, experience etc. Thus the view of the AAR that SIPCL works closely and advises the employees of Petitioner and hence makes available the services is not correct. This view in fact suffers from fallacy since the agreement continues to operate till date. If the view of AAR is to be held as correct then the contract must stand concluded as once the services and the know how, skill etc is transferred to Petitioner, the need of continuing to render said services must end. This is factually not so as the CCA is in effect till date. As it is clear that the AAR has interpreted the requirements to be satisfied for 'make available' based on its own general notion of the said term without appreciating the applicable law on the subject and also reached an erroneous conclusion that the services availed are technical services. AAR has not dealt with the issue relating to the 'Permanent Establishment' of SIPCL and there is no determination on the same. Of course, that was not a subject of reference before AAR. Thus, we have no hesitation in holding that the impugned order of AAR suffers from legal infirmity and is quashed and set aside.
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