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2022 (8) TMI 296 - Income Tax
TDS u/s 195 - taxability of the receipts of University of Texas, USA, under India-USA DTAA - 10% TDS on gross payments made to University of Texas at Austin, USA (Non-Residents) - whether the services rendered by non-resident University of Texas at Austin, USA to carry out research programme for development of suitable chemical Enhanced Oil Recovery (EOR) formulations in collaboration with the assessee is covered under “royalties/fees for technical services” or not? - HELD THAT:- The recipient after receiving of technology may use or may not use the technology. It has no bearing on the taxability aspect is concerned. When the technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilizes for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used - unless the service provider makes available his technical knowledge, experience, skill, know-how or process to the recipient of the technical service, in view of the clauses in the DTAA, the liability to tax is not attracted.
It is clear that test is whether the recipient of the service is equipped to carry on his business without reference to the service provider. If he is able to carry on his business in future without the technical service of the service provider in respect of services rendered then, it would be said that technical knowledge is made available.
We have referred the agreement between the assessee and University of Texas at Austin, USA, defining the scope of work and note that there was neither any patent/copyright used by the assessee against which the royalty was paid nor there was any technical know-how which was made available to the assessee. Thus in such facts and circumstances there is no liability on the assessee to deduct the TDS in pursuance to the Article 12 of India-USA DTAA.
There remains no ambiguity to the fact that there was any royalty payment made by the assessee or any technical know-how was received by the assessee. Accordingly, we set aside the finding of the Ld. CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.