Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 458 - AT - Income TaxIncome accrued in India - engineering package fee and on-site man-day charges - whether can be treated as FTS under the treaty provisions? - assessee is a non-resident corporate entity incorporated in France and a tax resident of that country - assessee claiming benefit of the Most Favoured Nation (‘MFN’) clause in paragraph 7 of Protocol to India – France DTAA has claimed benefit by taking shelter under the definition of FTS as provided under Article 12(4) of India – Portugal DTAA - HELD THAT:- As observed that the amount of Rs. 10,35,94,783/- was received by the assessee for providing basic site data lists, which included flow sheets, specifications, drawings, layouts, operating manuals, procedures to build/construct/install/assemble these smelter plants. It is not a simple case of loading a technology solution/software as observed by Commissioner (Appeals). The smelter plant certainly requires installation of multiple plants and machineries. It involves on-site planning and supervision of erection and installation of not only civil work but also the plant and machinery. There cannot be any dispute that the installation/erection process has to be taken up as per the flowsheets, equipments, specifications, drawings, layouts, operating manuals, procedures etc., without which, the installation process cannot be carried out. Therefore, in our view, the service rendered by the assessee is in connection with installation/erection of plant and machinery involved in mining of natural resources. Moreover, scope of Article 5(2)(g) of India – Portugal DTAA is not merely limited to mining or extraction of natural resources but also covers installation or structure used for exploration and exploitation of nature resources. Therefore, in our considered view, the amounts received would fall within the exceptions provided under Article 12(5)(f) and 12(5)(g) of India – Portugal DTAA, hence, not taxable at the hands of the assessee. Balance amount out of the engineering package fee, it is observed from the facts on record that they are not part of the TLA, but in pursuance to two independent purchase orders. In fact, learned first appellate authority has accepted the aforesaid factual position in paragraphs 5.2.12 and 5.2.13 of the order passed under section 154 of the Act. Therefore, they cannot be treated as fall out of the TLA so as to qualify as FTS under Article 12(4)(a) of the tax treaty. In fact, learned first appellate authority has treated it as FTS under Article 12(4)(b) of India – Portugal DTAA by stating that it comes within the ambit of second limb of Article 12(4), which does not require fulfillment of make available condition. However, on a reading of Article 12(4)(b) as a whole, it certainly appears that even the second limb that “consists of development and transfer of technical plan or technical design”, also requires the satisfaction of make available condition, as such words are qualified by “which enables the persons acquiring services to apply the technology contained therein”. The assessee has received the amount for providing drawings to enable HIL to study and comment on specific proposal involving process specification, equipment lists for paste plant and anode recycling shops of green anode based on RHODAX Technology. Facts on record reveal that the primary purpose of providing such documents, designs and drawings was for the appraisal of the contractee. It does not per se mean transfer of technology. There is nothing on record to suggest that the assessee is also the owner of RHODEX Technology. There is no evidence brought on record by the Revenue to establish that the drawings, designs etc. provided by the assessee has enabled the recipients to apply the technology contained therein independently. Thus, in our considered opinion, the amount included in the engineering package services would not qualify as FTS under Article 12(4)(b) of India – Portugal DTAA. On-site man-day fee though, it is in pursuance to TLA and may qualify for FTS under Article 12(4)(a), however, in our view, the receipts fall within the exceptions provided under Article 12(5)(f) and 12(5)(g) of India – Portugal DTAA, hence, would not qualify as FTS. Thus, we hold that the receipts in dispute are not taxable as FTS at the hands of the assessee. Assessee appeal allowed.
|