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2022 (7) TMI 1330 - AT - Income TaxIncome deemed to accrue or arise in India - management fee received by the Appellant is taxable as fees for technical services (FTS) under Income Tax Act, 1961 as well as under India - Singapore Double Tax Avoidance Agreement (DTAA) - “make available" clause - claim of the assessee was in view of the make available clause in the Indo Singapore tax treaty, and in view of the fact that the said clause was not satisfied on the facts of the present case, no part of the amount so received by the assessee was taxable in India on the facts of the present case - HELD THAT:- Unless the recipient of the services, by virtue of rendition of services by the assessee, is enabled to provide the same services without recourse to the service provider, the services cannot be said to have made available the recipient of services. A mere incidental advantage to the recipient of service is not enough. The test is the transfer of technology, but then it is not even the case of the revenue that there is a transfer of technology, and what is highlighted is the incidental benefit to the assessee, which is treated as an enduring advantage. As observed in the binding judicial precedents referred to above, in order to invoke “make available‟ clause, “to fit into the terminology "making available", the technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end” and “the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider”. Technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. In our considered view, that condition is not satisfied on the facts of the present case. We, therefore, hold that that “make available‟ clause in the Indo-Singapore tax treaty cannot be invoked on the facts of the present case- as no case is even made out by the revenue that as a result of rendition of these services to the Indian entity, there is any transfer of skill or technology. An incidental benefit or enrichment which may add to the capabilities is not sufficient; the critical factor triggering the taxability in the source jurisdiction is the transfer of skills. That is what the Hon’ble Karnataka High Court has held in the case of De Beers [2012 (5) TMI 191 - KARNATAKA HIGH COURT] and this judicial precedent, in the absence of anything to the contrary having been held by Hon’ble jurisdictional High Court, is binding on this forum. That condition about the transfer of skills and absorption of kill by the recipient of service, in our humble understanding, is not satisfied. Once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Income Tax Act, 1961, as in terms of Section 90(2), “where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee”. The taxability of impugned receipts, under section 9, is thus wholly academic. We leave it at that. We uphold the plea of the assessee, and direct the Assessing Officer to exclude the sum from his taxable income as fees for technical services. The assessee thus gets the relief accordingly.- Decided in favour of assessee.
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