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2007 (2) TMI 577 - AT - Income TaxProspecting and mining for diamonds and other minerals - Exploration over a large area carried out by geophysical methods - Company entered into an agreement for performing airborne geophysical services, process the data acquired during the survey and provide necessary reports - Consideration paid under the agreement as falling within the definition of " fees for technical services" ? - Liable to deduct TDS? - Deemed to permanent establishment in India - DTAA between India and Netherlands - HELD THAT:- There is no doubt that “Fugro” performed the services using substantial knowledge and expertise but such technical experience, skill or knowledge has not been made available to “De Beers”. As stated, as per the protocol signed between India and Netherlands, the memorandum of understanding entered into between India and USA would apply mutatis mutandis to article 12 of Indo Netherlands Double Taxation Avoidance Agreement. Thus we concur with the findings of the first appellate authority and answer the first sub-question in favour of the assessee and against the Revenue by holding that the payment made for “fees for technical services” does not fall within the ken of article 12(5)(b) of the Double Taxation Avoidance Agreement between India and Netherlands, for the reason that “Fugro” has not made available technical knowledge, experience, skill, know-how or process to “De Beers” while providing the service. Thus, this question is answered in the negative in favour of the assessee and against the Revenue. In the present case “Fugro” compiles the data and process them for error correction and deliver it to De Beers in a computer readable media. Using the raw input data provided by “Fugro”, the recipient assessee i.e. De Beers using further process in software technology (which are not owned or provided by “Fugro”) generates a report to determine probable targets. Thus the payments to “Fugro” cannot be considered to the payments for technical, plan and design much less, for the development and transfer of them. “Fugro” is engaged in providing services relating to collection and processing of data which always belonged to “De Beers”. The purpose of agreement is, for provision of services and not for supply or transfer of technical plan or design. The reports and maps are only an additional mode of report of data and cannot be construed as technical plan or technical design. The payments made to “Fugro” cannot be considered as “fees for technical services” as such payments are not in consideration for the development and transfer of technical plan and technical design. The agreement between “De Beers” and “Fugro”, the ownership of all information and data was always with “De Beers” and “Fugro” is bound by confidential clause. When the ownership of data is always with “De Beers”, there cannot be transfer of property from “Fugro” to “De Beers”. “Fugro” has not developed or transferred any technical plan or design to “De Beers” so as to attract article 12(5)(b) of the India and Netherlands Double Taxation Avoidance Agreement. Thus on this issue also we agree with the findings of the first appellate authority. Thus we answer the second question is in the negative, in favour of the assessee and against the Revenue. In the result all the appeals of the Revenue are dismissed.
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