Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (9) TMI 256 - AT - Income TaxNon deduction of tax u/s 40(a)(ia) payment to non residents - managerial service - Fees for technical services - Whether the payment made by the assessee company to USA company for the services rendered would be taxed in India or not - Held that:- The assessee, a resident company, entered into management service agreement with a company, viz. US Technology Resources LLC, a company incorporated in USA and a tax resident in USA - the USA company agreed to provide assistance, advice and support to assessee company in management decision making, sales and business development, financial decision making, legal matters and public relation activities, treasury service, risk management service and any other management support as may be mutually agreed between the parties - the USA company provided its assistance, advice and support and the assessee company paid a sum in consideration of the services rendered by the USA company - the term "managerial service" as found in Explanation 2 to section 9(1)(vii) of the Indian Income-tax Act, 1961 is not found in clause 4 of Article 12 of the DTAA between India and USA - in view of section 90(2) of the Income-tax Act, 1961, the assessee is entitled to take the benefit out of the DTAA between India and USA. Article 12 Indo-US DTAA - Which are the services included in clause 4 of Article 12 of the DTAA between India and USA Held that:- The assessee has received the above services from the USA company in terms of management service agreement between the assessee and the USA company - the USA company provides highly technical services which are used by the assessee for taking managerial decision, financial decision, risk management decision, etc. - Therefore, it is obvious that the USA company provides highly technical services which are used by the assessee for taking managerial decision, financial decision, risk management decision, etc. Nature of services - Fees for technical services u/s 9(1)(vii) - Whether the services provided by the USA company are technical in nature or not Held that:- The USA company facilitated the assessee company for making decision in the managerial, financial and risk management system by providing their knowledge, expertise, experimentation to the assessee company - The entire experiment, knowledge, expertise was made available to the assessee and the assessee was facilitated to take a decision on the knowledge, expertise, experimentation which were made available by the USA company - rendering of service and making use of the service are two sides of the same coin - after considering the word "which" the Authority for Advance Ruling found that rendering technical or consultancy service is followed by relative pronoun "which" and it has the effect of qualifying the services- The service offered may be the product of intense technological effort and lot of technical knowledge and the experience of the service provider would have gone into it - The Authority for Advance Ruling found that the technical knowledge and the experience of the service provider should be imparted to and absorbed by the receiver, so that the receiver can deploy similar technology or techniques in future without depending on the provider - the information, expertise and training provided by the USA company was absorbed by the assessee company in their decision making process and it was utilized for the purpose of business - The USA company made available all the technical data, information, expertise to the assessee company which was absorbed and made use of by the assessee company in their managerial and financial decision making process and other decision in the development of the business - the expertise and technology which was made available by the USA company is technical service within the meaning of Article 12(4)(b) of the DTAA between India and USA the order of the lower authority is upheld Decided against Assessee.
|