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2019 (7) TMI 402 - AT - Income TaxIncome accrued in India - Reimbursement of cost - whether taxable as fees for technical services (FTS) - Assessee company is a tax resident of France - HELD THAT:- We are confronted with a situation in which Mr. Franck Euvrard was employed by Faurecia India as its CEO. It is not as if Mr. Franck Euvrard was rendering services to Faurecia India on behalf of the assessee for which the amount in dispute was received by the assessee company. Rather, it is a case of Mr. Franck Euvrard working as an employee of Faurecia India. The assessee had no role to play in the rendition of services by Mr. Franck Euvrard to Faurecia India, except that a part of salary payable by the Indian entity was initially paid by the assessee in France to Mr. Franck Euvrard, which was later on recovered without any profit element. Thus, it is held that the sum of ₹ 47.30 lac received by the assessee from Faurecia India is not in the nature of fees for technical services u/s.9(1)(vii) of the Act. Sum received by the non-resident assessee from the Indian entity is not chargeable to tax in its hands as the same is in the nature of reimbursement of cost and does not fall within the purview of `Fees for technical services’ u/s. 9(1)(vii) of the Act. We, therefore, overturn the impugned order on this score and order to delete the addition. Taxability towards receipt of Support services - consideration for technical and managerial services - royalty or FTS - nature of services rendered by the assessee to Faurecia India in terms of Services Agreement - India UK DTAA - HELD THAT:- As adverted to the nature of services rendered by the assessee to Faurecia India and found them to be Managerial and also Technical in nature. Managerial services are concerned, the consideration for them goes out of the purview of `Fees for technical services’, as the term “managerial” is absent in Article 13(4) of the DTAA with UK. Case of the AO rests on treating consideration for such services as `Royalty’ or `Fees for technical services’ only. Resultantly, payment for the Managerial services cannot be brought with in the scope of the term `Fees for technical services’ under Article 13 of the DTAA with France as read in conjunction with the DTAA with the UK. As far as the remaining Technical services rendered by the assessee to Faurecia India are concerned, it is seen that these are of coordinating the Information system and assisting Faurecia India in computerisation of systems, office automation and utilisation of personal computers which fall into the aforesaid three categories namely, Operations, Technical support and Studies. On going through the nature of such services, it is manifested that these do not result in making available any technical knowhow etc. to the Faurecia India. When we advert to the nature of the Technical services rendered by the assessee, it gets axiomatic that no technical knowledge was made available by the assessee to Faurecia India for its use thereafter. Rather, it is a case of providing a service involving technical knowledge, which got consumed with its provision itself. Since such services simply involve use of technical knowledge and do not result into handing over some technical knowhow to Faurecia India, the same, in our considered opinion, cannot be termed as “Fees for technical services” under the DTAA. Total amount received by the assessee for rendition of services to Faurecia India, which is a mixed bag of Managerial and Technical services, does not eventually make available any technical knowledge, experience, skill, know-how etc. to the India entity and hence the same cannot in our considered opinion be considered as `Fees for technical services’ under Article 13(4) of the DTAA with France when read with the Protocol and Article 13(4) of DTAA with the UK. As the extant payment received by the assessee can neither be construed as `Royalty’ u/s 9(1)(vi) of the Act nor as `Fees for technical services’ under the DTAA, the same cannot be included in the total income of the assessee. Ex consequenti, we overturn the impugned order on this score and order the deletion of the addition. - Decided in favour of assessee.
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