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2019 (4) TMI 2018 - AT - Income TaxIncome accrued in India - amount received by the assessee from rendering services in India - whether is not in the nature of fees for technical services? - scope of expression 'make available' - India–Netherland DTAA - whether the services rendered by the assessee to HIPL under the management service agreement is purely managerial in nature so as to take it out of the purview of fees for technical services as defined under Article–12(5) of the India–Netherland Tax Treaty? - As services rendered by the assessee is not purely managerial but has the trappings of technical and consultancy services as well, whether in the absence of satisfaction of the make available clause the fees received can be treated as fees for technical services? - HELD THAT:- As seen from definition of fees for technical services under the tax treaty, managerial service is not included under the definition of fees for technical services. Therefore, though some services rendered by the assessee may have the trappings of technical or consultancy service, however, the core activity of the assessee under the agreement is, providing managerial services. That being the case, the amount received by the assessee from HIPL cannot be treated as fees for technical services under Article–12(5) of the India–Netherland Tax Treaty. More so, when the Assessing Officer has not demonstrated what amount can be attributed towards technical or consultancy service. The expression ‘make available’ not only would mean that recipient of the service is in a position to derive an enduring benefit out of utilization of the knowledge or knowhow on his own in future without aid of the service provider, but such technical knowledge, experience, knowhow, skill, etc., must remain with the recipient even after expiry of the contract. It has further been held that the technology will be considered to have been made available when the person acquiring the service is able to apply the technology independently. Therefore, to come within the purview of fees for technical services under Article–15(5) of the India–Netherland Tax Treaty, rendering of services and making available of technical knowledge, experience, knowhow, skill, etc., have to take place simultaneously. AO has failed to demonstrate through any material brought on record that while rendering services to HIPL, the assessee has made available any technical knowledge, experience, knowhow, skill, etc., enabling HIPL to apply such technology independently. Rather the facts on record if considered vis–a–vis the service agreement would clearly reveal that while rendering services, the assessee has not made available any technical knowledge, experience, knowhow, skill, etc., to HIPL for its independent use. - no infirmity in the order of the learned Commissioner (Appeals) in holding that the amount received by the assessee from HIPL is not in the nature of fees for technical services, hence, deleting the addition made by the Assessing Officer. - Decided in favour of assessee.
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